Estate Income Tax Clearance – Part 2
09 November 2023
This is a short note to help those solicitors who may be running the income tax clearance procedure themselves inhouse rather than outsourcing it to an external accountant. These are some of the general steps to take and timings around these. There is no hard and fast rule and each case will depend on its own facts. There is no “one size fits all” but this is some general tips.
Step 1. Initial consultation with executor client. Its best to get the issue of Revenue clearance out of the way as quickly as possible. As it is a dry, technical topic, it may be best to deal with the matter at the start of the probate consultation, rather near the end when concentration levels (of everyone!) begin to wane. It is useful at the start of the consultation to obtain a short summary of the working life of the deceased, setting out the various employments of the deceased and what was the income of the deceased on the run up to their passing. This should not need to extend beyond a short paragraph of mayble 5 to 10 lines. This is useful for two reasons. It helps you as a solicitor understand the position. Secondly, it helps you in giving Revenue a short synopsis of information where they may have none.
Step 2. At the same consultation, one should go through the due diligence questionnaire with the executor client and try to ascertain as much of the information as possible or flag issues that may arise. One issue that can arise quite regularly is an Irish resident deceased not dealing with CGT issues in Ireland on the sale of foreign property. This can be often omitted. Other areas of focus should be rental or dividend income. One may or may not have enough information at this consultation to allow the executor client sign the due diligence questionnaire and further information may be required.
Step 3. Ascertain at the first consultation, what accountant is going to be used to assist with completing the relevant form 11s or 12 (that is the income tax returns for the deceased).
Step 4. Talk to the executor. Do they have a good picture of the income tax history of the deceased. Were returns done up to now? In the vast majority of cases, returns are not generally done for individuals, or perhaps not all information is obtained
Step 5. As soon as possible after the consultation one should order from the relevant financial institutions and from the Department of Social Welfare statements going back 5 years. This is to allow whatever accountant who is doing the income tax returns to see and verify the monies being received by the deceased over the years. It allows the accountant put together an income profile. One does not need to have a signed authority form the executor to obtain these statements as the institutions generally will provide the statements without a grant and without an authority.
It should be noted however, that, one generally cannot get dividend income statements from share registries until such a time as one has in place the grant of probate. Even in those cases one generally will require a sealed and certified version of the grant to deal with each of these registries. So that can be a delaying factor in collating financial information.
Step 6. Also, a step that can be taken at an early stage is to agent link in the deceased PPS number to the accountant’s TAIN. Revenue will generally require requests for income tax clearance to be made through a TAIN number (that is a Tax Agent Identification Number). While it is not dealt with in the guidance, one will find that a regular query raised by Revenue in relation to submissions for clearance is that they require submissions to be made through a TAIN. One issue to note is that foreign resident deceased individuals will not have an income tax profile with Revenue. In these cases one must register the PPS of the deceased, who has died abroad, for income tax using a form TR1. This is not registering the estate, but the deceased. Once that registration is through, an agent link can then be set up with the relevant accountant
Step 7. You will need a system in place to keep chasing each of the financial institutions for statements as they are painfully slow in issuing this information. It can take up to six months at times to get this information on file.
Step 8. It should be noted that one cannot apply for clearance until such a time as one has submitted at least two years income tax returns to Revenue. Generally the year of death and the full year before death. So, if one does not have all of the income information one is hampered from making the application to Revenue for clearance.
These are just some of the initial steps one should be taking when dealing with Revenue clearance. More in our next blog on the next steps and some of the issues that arise. And remember if you have any tax, probate or will drafting queries, please do not hesitate in reaching out through the site or at email@example.com. Colm Kelly