This form is essential when someone assumes responsibility for managing the financial affairs of another person, such as when an executor handles an estate or a guardian manages the finances of a ward. Here’s a detailed explanation of how to use IRS Form 56:
Purpose of IRS Form 56
Notify the IRS of a Fiduciary Relationship: When an individual or entity takes on a fiduciary role, such as an executor, administrator, trustee, guardian, or receiver, they must inform the IRS using Form 56. This ensures that the IRS recognizes the fiduciary's authority to act on behalf of the taxpayer.
Terminate a Fiduciary Relationship: The form is also used to inform the IRS when a fiduciary relationship ends, such as when the responsibilities are completed, the trust or estate is closed, or the fiduciary resigns or is replaced.
When to File Form 56
Starting a Fiduciary Relationship: File Form 56 as soon as the fiduciary relationship is established.
Ending a Fiduciary Relationship: File Form 56 promptly when the fiduciary relationship terminates or the fiduciary responsibilities are completed.
Information Required on Form 56
Identification of the Person for Whom You Are Acting:
Full name and address
Social Security Number (SSN), Employer Identification Number (EIN), or Individual Taxpayer Identification Number (ITIN)
Identification of the Fiduciary:
Full name and address
Fiduciary's SSN or EIN
Details of the Fiduciary Relationship:
Type of fiduciary (e.g., executor, administrator, trustee, guardian, receiver)
Date the fiduciary relationship began or ended
Description of the fiduciary’s authority, such as under a will, trust instrument, court order, or other legal document
Notification and Termination:
Indication of whether the form is being used to notify the IRS of the start or end of the fiduciary relationship
Filing Instructions
Where to File: Mail Form 56 to the IRS address where the taxpayer for whom the fiduciary acts files their tax return.
Supporting Documentation: Attach any necessary documentation, such as a copy of the will, trust instrument, or court order, to support the fiduciary relationship.
Steps to Use IRS Form 56
Obtain the Form: Download IRS Form 56 from the IRS website or obtain it from an IRS office.
Complete the Form:
Fill in the identification sections with accurate details of the taxpayer and the fiduciary.
Provide details about the fiduciary relationship, including the type, dates, and authority under which you are acting.
Attach Supporting Documents: Include any necessary documents that establish your authority as a fiduciary, such as a copy of the court order, will, or trust instrument.
Mail the Form: Send the completed form and any attachments to the appropriate IRS address. The address will depend on where the taxpayer typically files their returns.
Keep Copies: Retain copies of the completed form and all supporting documents for your records.
Importance of Filing Form 56
Tax Obligations: Ensures the IRS recognizes the fiduciary’s authority to manage the taxpayer’s financial matters and file tax returns on their behalf.
Communication: Helps the IRS direct correspondence and tax information to the correct person or entity responsible for the taxpayer’s financial affairs.
Avoid Penalties: Proper notification can help avoid potential penalties and complications related to the taxpayer’s financial and tax matters.
By correctly using IRS Form 56, fiduciaries can ensure they fulfill their legal responsibilities and maintain clear communication with the IRS regarding their authority and actions on behalf of the taxpayer.