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Table of Contents
What is Form 56, and why might you need it?
Form 56 is a notice concerning fiduciary relationships.
Entering into a fiduciary relationship gives you a legal responsibility to inform the IRS about the matter to ensure timely communication and accurate delegation of duties between the fiduciary and the IRS.
What is a fiduciary relationship?
A fiduciary relationship is a legal relationship of a person or entity to act on behalf of another.
A standard fiduciary relationship involves a trustee (the fiduciary) and a beneficiary (the individual). The trustee manages assets, informs the beneficiary, and provides regular accounting for the beneficiary’s benefit.
In this instance, the trustee must file Form 56 to assume these responsibilities.
How long is the extent of responsibilities regarding Form 56?
The fiduciary assumes the taxpayer’s powers, rights, duties, and privileges concerning tax matters. The IRS treats a fiduciary as if he or she is actually the taxpayer.
Once designated, the fiduciary has the right and responsibility to shoulder any actions required, like filing tax returns and paying tax dues.
The rights and responsibilities continue until the IRS is notified of its termination under Section 6903 of the US Internal Revenue Code (IRC).
What is Section 6903 of the US Internal Revenue Code (IRC)?
Section 6903 deals with the notice of a formation or termination of a fiduciary relationship; it is formal documentation to notify the IRS about the relationship and their role.
Formation: Upon entering a fiduciary relationship, the fiduciary must inform the IRS about the assumption of tax obligations that must be performed.
Termination: Upon revoking the relationship, the fiduciary must complete a new form 56 to update the IRS. This ensures that the IRS is informed of changes in fiduciary status and can update its records accordingly.
What might occur if I forget to file IRS Form 56?
Forgetting to file Form 56 will mean that the IRS does not recognize you as a fiduciary, and all assumed obligations will not be communicated to you.
You will not be penalized for forgetting to submit Form 56. However, due to miscommunication, the IRS may continue to send tax notices and information to the wrong person, which may lead to penalties for late filing, undelivered deadlines, and errors in tax submissions.
Who needs to submit Form 56?
Here are some situations when you are obligated to assume a fiduciary role:
- Trustee: If you manage the trust of a beneficiary.
- Executor: If you are managing the tax affairs of an estate belonging to a deceased person.
- Receiver: If you oversee a business or property under a court order.
- Guardian: If you are appointed as a guardian of an individual.
Do not use Form 56 if you are notifying the IRS that you are the authorized representative. You will instead need to use Form 2848, Power of Attorney and Declaration of Representative.
What is the process for filing Form 56?
Part I: Identification
- Enter your name, address, and taxpayer identification number (TIN).
- Provide the name, address, and TIN or SSN of the person or entity you are acting on
Part II: Court and Administrative Proceedings
- Specify whether a court or other administrative process established the fiduciary relationship.
- Include related details such as dates and case numbers.
Part III: Authority
- Identify your fiduciary role (e.g., executor, trustee, guardian).
- Provide the date when the fiduciary relationship began or ended.
Part IV: Signature
- Sign and date the form to confirm that the information is accurate.
Here are a few notes to remind yourself of:
- Identification: Under section 6109, you must give the Social Security number or ID of the person or entity you represent. This helps the IRS identify the taxpayer and access their records to answer your request.
- Updating the address: Form 56 cannot be used to change the address of the person or entity you’re managing; instead, you can use Form 8822 or Form 8822-B
- There is more than one fiduciary: Each fiduciary must submit a separate Form 56 or otherwise inform the IRS of their status.
- Incomplete information provided: The IRS may delay processing the notice of fiduciary relationship and will not recognize it as valid until you supply the required information.
- Providing false information: Submitting false information could result in penalties.
When and where do I need to file Form 56?
You can file Form 56 as soon as you start your fiduciary duties. It is usually sent to the IRS office, where the person or entity you represent usually files their tax returns.
If it’s for an estate, you may need to file it at the IRS center handling the estate tax return, depending on the situation.
Your specific address depends on your residence and the relevant IRS department for that state.
Can I include Form 56 when submitting my tax return?
Yes, you can submit Form 56 with your tax return. However, you cannot use it to notify the IRS that you are the taxpayer’s authorized representative; you can use Form 2848 instead.
How does IRS Form 56 relate to other IRS forms?
IRS Form 56 can work with several other IRS forms to facilitate the proper management of tax issues for the individual or entity under your care. You can file Form 56 alongside other IRS forms.
Here are a few examples:
Form 2848 (Power of Attorney):
Form 2848 grants authority to an individual to act on your behalf in tax matters.
Form 8822 (Change of Address):
Form 8822 informs the IRS of any changes or updates to your mailing address, ensuring that your records are current and correspondence is received promptly.
Form 706 (Estate Tax Return):
Form 706 is utilized to report a deceased individual’s estate tax obligations. This usually applies to fiduciary executors.
Form 1041 (Income Tax Return for Estates and Trusts)
Form 1041 reports an estate or trust’s annual income, deductions, and credits.
