I was told by our Branch Support people that as a bank, we are required to report all post-death interest under an Estate EIN, and that we CAN NOT use the deceased or personal representative TIN/SSN.... does anyone know if this is true?

I have had a couple different customers who have consulted multiple CPA's regarding the issue, and in all instances the CPAs say we (the bank) don't need an EIN as the post-death tax returns are less than IRS requirements for estate taxes etc. The back room people told me that even though the deceased's assets are under IRS requirements for a formal estate filing, since it's over our state's small-claims estate threashold ($15M), the bank is required to get an EIN or else we have to do backup withholding.

I consulted a CPA friend of mine and he said he's not aware of any specific requirements that a bank get an EIN, however he could see why it could be our bank's policy to get at EIN as it would be the best way of covering our butts. However all the back-room people who have advised me on this say it's not just our banks policy, it is a federal requirement/regulation.

This is only involving federal income/estate reporting as there is no state taxes.

Any comments? Suggestions? Answers????

I hope my ramblings made sense.

Thanks

I,m not sure what federal law says on this matter. We ask the personal rep how they want to handle the account. As long as they are filing a tax return for the decedent I believe they are leaving the interest earned under the social security number. If they are required to file a return under the Estate they would need a federal ID number. We don't presume to give them legal advice on whether they need a TIN for the estate or need to file taxes under the estate name. Basically, we rely on them to inform how to report the interest.

I agree, the bank should report the interest earned based on the last instructions received from the customer (i.e., individual TIN) until instructed elsewise by the executor/personal rep.. The bank should not be providing tax advice or instructing an executor/personal rep. to take any specific action. Any interest report under the individual TIN will have to be accounted for in the tax returns of the estate if one is created. If one was necessary and was not created or filed, the executor/personal rep. is on the hook and not the bank.

Looking back to my years as a Trust Auditor, I remember that IF an estate is going to be opened (it depends on your state's probate laws), you will need to get an EIN in order for the PR to properly complete the Post Death Tax Returns. By no means should you ever use the PR's SSN.

We too have a back room procedure that if an account title is going to change to an estate, we close the existing account as of the DOD to stop reporting interest under the deceased SSN, and re-open the account under the Estate using the EIN. I have had more problems with PR's by not following this procedure than I ever had with a PR by making them provide an EIN. Sometimes, however, the PR is simply going to transfer the assets to direct beneficiaries (check state probate laws) and wants to leave the account open until they are ready, I would suggest that you stop paying interest as of the DOD or ask the PR to close the account and immediately disburse the funds. If not, you may have more headaches in January by submiting corrected 1099 INT to IRS.

This is one more argument that individuals serving as PR's should seek legal assistance or trust professionals than to pretend they know what they are doing in Estate administration.

Just keep in mind that no matter how you handle it, if you are dealing with the I.R.S. you will do it wrong. I was the personal representative for a relative who passed away. I consulted the I.R.S. about whether I needed to obtain an EIN or continue to use the decedent's SSN. The I.R.S. told me I needed to apply for and obtain an EIN for the estate, which I did. I then filed income tax returns for the deceased person and completed all of the necessary forms, etc. required by the I.R.S. in order for the refund to be issued to the estate under the new EIN. And guess what??!!!......when I finally received the refund check after waiting for about three months, it was payable to the decedent under her personal SSN. You can't win, so just handle it however you think is right because, according to the I.R.S. you will still be wrong.

An EIN is always required for estate accounts. CPA's and lawyers often tell customers that an EIN is not needed because the estate falls under the threshold where an estate tax return must be filed. As far as reporting TIN's for bank accounts are concerned, an EIN is needed because a person's SSN dies with them. Consult IRS Publication 1635 - Understanding Your EIN. It will be helpful. Also, simply look at Form SS-4 - Application for Employer Identification Number. Box 8A lists "Estate." Box 9 lists a purpose as "Banking purpose." Also, see the instructions on page 2 of Form SS-4. I have branch personnel complaining about this all the time, but bank's must have an EIN for estates because we cannot continue reporting under a deceased person's SSN.

SteveMc.... would you say the bank would also need an EIN simply for reporting of any post-death interest on a interest-bearing account?

A perfect scenario is this.... I have a sole-owner Savings, CD, and interest-bearing checking account. I die. Two months from now my wife comes into the bank to close the above accounts. She is acting as personal representative of my estate, even though it is less than the $600M whatever IRS estate requirement. My wife is told that they need a W9 for the estate EIN to report all interest earned on my accounts from the date of death through the date we're closing the accounts. My wife says "My CPA told me we're filing everything under my husband's SSN". The bank representative tells me that unless I can provide them with an EIN, they will do backup withholding and withhold 30% of all interest earned since the day I died.

Does this sound correct to you????????

Thanks.

I attended a training on IRS requirements and YES, we were told that "a social security number "dies" with the individual". The social security number cannot be used for the estate, a number for the estate must be issued.
I'm sorry but I don't know exactly where that is found in IRS code.

I include SS-4, W-9, W-8 and W-7 forms in my BSA training manuals to provide branches with information needed to understand (and educate customers) on proper TIN usage. Also the instructions for these forms and the forms for requestors of TIN is very helpful. You can get copies from www.irs.gov.

I have found that most customers don't have EINs for estates (and some informally organized associations) because they simply don't know how to get one. We will send in an SS-4 for our customer to assist in this process. It takes only a few minutes to complete the form, have the customer sign it and fax it to the IRS.

What do you do in those cases where the estate account is not interest-bearing?

You must be desperate for an answer if you disintered this thread, but I love the people who look before asking!

If the account is non interest bearing, your concerns are limited to BSA compliance. As you are not going to get a TIN, you need to add this to the list of all accounts for which you do not have a valid TIN on file.

31 CFR 103.34(a)(1)In the event that a bank has been unable to secure, within the 30-day period specified, the required identification, it shall nevertheless not be deemed to be in violation of this section if (i) it has made a reasonable effort to secure such identification, and (ii) it maintains a list containing the names, addresses, and account numbers of those persons from whom it has been unable to secure such identification, and makes the names, addresses, and account numbers of those persons available to the Secretary as directed by him.

From Ken: No guesses about what the final CIP regs would do about this. The proposal made no attempt to clean up redundancies and out and out conflicts with other portions of the reg. It was like the new reg was written in a vaccum. (Yes, I said that in my comment letter.) Whether required or not, I encourage banks that "No TIN, no account" is the best policy.

Irrelevant.
Distributions from the Estate to the beneficiaries will be taxable to the benes as ordinary income. This in effect makes the Estate a payor for reporting purposes. This will also be true regardless of the size of the Estate (i.e. under the $1,000,000 federal estate tax threshold.) I am speaking from personal experience here, as both PR and bene. The accountant required an EIN, and in fact sent me the SS-4 for my signature.
Opinions expressed are my own and may not be shared by my employer. As legal advice they are worth exactly what you paid for them.

Over and Under - regarding your disclaimer.

You really forbid your employer from sharing your opinion with others??

Sorry - couldn't help myself

Over and Under

Irrelevant? That's a little harsh. Did you skip lunch today?

Distributions from estates are not taxable under section 61 of the Internal Revenue Code except to the extent they carry out income earned by the estate or income in respect of a decedent. Estates that have less than $600 in income do not file 1041's with the IRS, K-1's with beneficiaries or anything else related to income taxes. As property is often jointly held with a spouse and does not pass through the estate, many estates have no income producing corpus and a well schooled executor might intentionally avoid earning income on a small amount of money or even large amounts held for a short period in order to side step filing requirements and more difficult level of administration. That is, he or she might intentionally open a non interest bearing account. (No personal experience, but I did sleep at a Holiday Inn Express last night and spent 5 years as a trust officer settling estates.)

However, none of that is relevant to the depositary bank. If it is a noninterest bearing account, the Internal Revenue Code's requirements do not apply, only BSA.

As the answer indicates, I would still require the EIN as a condition for opening the account, but it's better not to confuse best practices with legal requirements.

Would another important reason for obtaining an EIN be for CTR reporting purposes? For example, if the executor/trix deposits or withdraws more than $10,000 into or out of a non-interest bearing account, then, how would you report the SSN/EIN info. in section A of the CTR if the only number you have is that of the decedent??

Yes, the fact that you do not need the EIN at account opening does not mean you will not need it later in connection with some other compliance responsibility such as CTR filing or escheat. In addition, although the account was opened as a DDA, many systems allow it to be converted to a NOW simply by changing an indicator in a field. The person who did the maintenance may not have noticed there was no TIN and now we have an interest bearing account with no TIN - we have triggered backup withholding and an annual $50 penalty for a 1099 with no TIN.

However, the summary reason why "no TIN, no account" is the preferred practice is that there is no need to train CSR's on narrow exceptions - just tell them to get a certified TIN as a condition of opening the account. There is no measurable inconvenience to requiring the customer to get an EIN for the estate; it is free and requires the completion of a single form.

Again, the proposed CIP rules would tend to make this exception moot, but they did not delete it from the reg.

Ken/Pegasus
Our postings "crossed in the mail." My response of "irrelevant" was intended for the post prior to yours. Your opinion/guidance is never irrelevant. Mine maybe, but never yours. Sorry for the confusion.

It's about the way the pages "fold" and I've done the same thing. It's nice of you to say my responses are never irrlevant. However, my favorite T-shirt, a gift from my family, says "Insufficient Memory at This Time." They may have noticed something you haven't.