IRS Form 56
Published on September 19, 2024
by Aya Takriti, EA
Aya Takriti, an IRS Enrolled Agent with 10 years of expat tax experience, specializes in US tax preparation, tax planning and tax advice for US citizens and Green Card holders living and working in the Middle East.
Table of Contents
Do I need to file a Form 56?
If you officially entered a fiduciary relationship, you must file Form 56 to the IRS.
Form 56 is a notice concerning fiduciary relationships; reporting to the IRS upon establishing or terminating this relationship is essential to ensure transparent and accurate communication.
Purpose of a fiduciary relationship
A fiduciary relationship is a legal relationship composed of two or more parties. The fiduciary has a duty to assume responsibilities in good faith to the other party in the relationship.
A common example of this relationship is between a trustee and a beneficiary. The trustee must file Form 56 for the IRS to recognize assumed responsibility, such as managing assets with tax responsibilities for the beneficiary’s benefit.
What is the scope of the relationship with Form 56?
A fiduciary takes on the taxpayer’s powers, rights, duties, and privileges related to tax matters. For the IRS, the fiduciary is simply the taxpayer.
Upon appointment, the fiduciary automatically takes the responsibilities required by the IRS and has the right to perform them.
The fiduciary should continue with the legal rights and responsibilities until the relationship terminates, which should be reported to the IRS under section 6903 of the US Internal Revenue Code (IRC).
What’s under Section 6903?
You are obligated to address the formation and termination of a fiduciary relationship with the IRS.
Formation: Providing the IRS with essential information regarding fiduciary relationships facilitates accurate and necessary tax reports and filings
Termination: The fiduciary must complete a new form 56 indicating the termination of the fiduciary relationship to ensure the transfer of tax matters and keep IRS records updated.
What are the risks of not filing IRS Form 56?
The IRS will not recognize the supposed fiduciary and their assumed tax obligations, which will result in missed or undelivered deadlines or unaddressed tax concerns. There is no penalty for not filing Form 56, but you will still be penalized for any late filing or errors in tax submissions.
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Who should file Form 56?
Here are some examples of when you are required to take on a fiduciary role:
- Trustee: If you manage the trust of a beneficiary.
- Guardian: If you are appointed as a guardian of an individual.
- Executor: If you are managing the tax affairs of a deceased person’s estate.
- Receiver: If you are managing a business or property by court order.
How do I fill out Form 56?
Here’s a step-by-step process for filling out 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
- Indicate if a court or other administrative process set up the fiduciary relationship.
- Include related details such as dates and case numbers.
Part III: Authority
- Identify your fiduciary role (e.g., executor, trustee, guardian).
- Indicate the date when you started or ended the fiduciary relationship.
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: You must provide the Social Security number or other ID of the person or entity you represent. This helps the IRS correctly identify the taxpayer and access their records to respond to your request.
- Updating the address: You cannot use Form 56 to update the address of the individual or organization you’re acting for. Refer to Form 8822 or Form 8822-B.
- There is more than one fiduciary: Each must file a separate Form 56 or otherwise notify the IRS of their status.
- Incomplete information provided: The IRS may suspend processing the notice of fiduciary relationship and not consider a proper notification until you provide the necessary information.
- Providing false information: You may be subjected to penalties.
When and where should I file Form 56?
You can submit your Form 56 as soon as you begin your fiduciary duties to the IRS office, where the person or entity you act as a fiduciary typically files their tax returns. The exact address you need to file depends on your state of residence and the corresponding IRS service center for your state.
However, when filing for an estate, you might need to submit it to the Department of the Treasury (Kansas City, MO 64999) where the estate tax return is filed, depending on your specific circumstances.
Can I submit my Form 56 alongside my tax return?
Yes, you can include Form 56 upon submitting your tax return. However, if you inform the IRS that you’re the taxpayer’s authorized representative, you should use Form 2848 (Power of Attorney and Declaration of Representative) instead.
How does Form 56 affect the processing of other IRS forms?
IRS Form 56 coordinates with various other IRS forms to ensure effective management of tax matters for the individual or entity you are responsible for. Here are several examples:
Form 2848 (Power of Attorney):
Form 2848 grants the right to represent you on your behalf in other tax obligations.
For other tax matters, you can broaden the extent of the authority granted with Form 2848.
Form 8822 (Change of Address)
Form 8822 is used to notify the IRS of a change or update in your mailing address to ensure timeliness on file. If your address changes after filing Form 56, you should file Form 8822 to update the IRS with your new address.
Form 706 (Estate Tax Return)
Form 706 is used to report a deceased person’s estate tax liability.
Executors who submit Form 56 must frequently file Form 706 to report and settle any estate taxes owed.
Form 1041 (Income Tax Return for Estates and Trusts)
Form 1041 is used to report an estate or trust’s income, deductions, and credits.
Trustees who file Form 56 will use Form 1041 to report the trust’s annual income and pay any taxes owed.
