How do you finalize and put an end to the Estate Tax process?

[fpc]

I am the executor for an estate, charge by the hour, and have no further assets to distribute.  In 2021, I've spent 10 hours preparing "final" tax returns for 2020.  I purchased TurboTax Business and a state return.  

Can I account for those expenses on the 2020 return even though the expenses were incurred in 2021?  If I have to file a return in 2022 to cover my 2021 expenses, I'll have to file a return in 2023 to cover 2022's expenses and on and on  🙂  . 

What is the proper way to put an end to this process?

Thank you!

Frank

[tagteam · Accepted solution]

At some point it would be presumed that your services will no longer be required and the estate will not incur any fees from your services.

Otherwise, on a cash basis, expenses are deducted in the year they are paid. Of course, there is nothing stopping the estate from paying you a fixed sum in advance.

[fpc]

Thank you for the reply.  Makes sense.

So, looking back, it seems I should have estimated and charged for my 2021 expenses and compensation in 2020.   Since I didn't do that, I believe you are indicating that I need to file a return for 2022 to cover the expenses incurred in 2021, which were due to tax preparation for 2020.  However there will be no funds remaining to cover my 2022 expenses.  And it would seem submitting the K-1's for the 2021 tax year to the heirs wouldn't make sense.  

Does this proposed plan seem correct?

Thank you for the help!

[tagteam]

Probably the only recourse would be to have the beneficiaries compensate you directly. 

[fpc]

Reasonable idea.

Please allow me to ask one final question...

In mid-year of 2020, I did anticipate what the expenses would be to prepare 2021 taxes.  I set the funds aside  in an Accounts Payable account but did not write myself a check to cover those anticipated expenses.  I wanted to be sure not to distribute those funds to the beneficiaries.  Would it be an acceptable practice to indicate that I had been paid in 2020 even though I hadn't written the check?

Thank you for the help!

[tagteam]

Frankly, if you report the income on your 2020 return, no one is likely to care one way or the other.

[fpc]

Thank you !!!

I really didn't want to continue submitting these returns for the rest of my life.