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  1. #1
    trust_id_09 is offline Member
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    W-9 Form Sent to Trust Beneficiaries

    What is the name of your state (only U.S. law)? New York

    As the trustee of an irrevocable trust, in order to curtail tax rate to the beneficiaries' estate distribution from nealy 20K worth of ordinary income(excluding the principal) tax assessed at trust rate (which is mid 30%), I mailed a W-9 form to each bene. The goal is, since I don't know these people and to prevent them from providing me with a false SSN#, I chose that form which has a perjury disclaimer. My accountant told me @ this year filing that I would need all bene. ssn# in order to file a fidiciary tax return for the next fiscal year.
    One beneficiary returned the form, but fails to provide the sole information on that form for which it was designed:the SSN#.
    Although it may not be a valid form for that exact purpose, but to protect myself, I had to formalize my request. As there are no other legal form out there that is suitable for that type of information.
    Am I out of line here?

    I am dealing with a non-sophisticated audience and I verbally explained to her in particular the reason for my request is to benefit them.
    She has a propensity for deceipt i.e trying to beat the system and probably want to get the money w/o paying any income tax on it. Which is rather stupid. I would much rather paying below 28% than 36%.

    Any input will be greatly appreciated. Thanks.
  2. #2
    davew128 is offline Senior Member
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    Quite honestly I have NO idea what you're talking about and I DO fiduciary returns. Distributions from a trust/estate in and of themselves don't mean a thing for tax purposes nor do they carry a tax rate to them. If you distributed income, then presumably all that is left to tax for the trust is capital gains which is 15% anyway.

    From a simply think about standpoint, if you didn't get a response from sending a tax form (not exactly a surprise), there is this wonderful invention called a telephone. CALL THE BENEFICIARIES AND ASK THEM.
  3. #3
    trust_id_09 is offline Member
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    Not necessarily True

    Quote Originally Posted by davew128 View Post
    Quite honestly I have NO idea what you're talking about and I DO fiduciary returns. Distributions from a trust/estate in and of themselves don't mean a thing for tax purposes nor do they carry a tax rate to them. If you distributed income, then presumably all that is left to tax for the trust is capital gains which is 15% anyway.

    From a simply think about standpoint, if you didn't get a response from sending a tax form (not exactly a surprise), there is this wonderful invention called a telephone. CALL THE BENEFICIARIES AND ASK THEM.
    First let's cut the sarcasm! Second the income in question is from a tax deferred form of investment. And the proceeds of the spread is taxed at a higher rate which is the trust's rate. The same is true for inteest earned on principal of the trust. You are looking at this as if it were capital gains on securities sold. Not the case here. Hence the request for his/her ss# since he/she is ain a much lower tax bracket than that of the trust. Besides, it is a marginal amount to that idiot anyways; who happened to be to dumb to realize it. It's a no brainer, anyone in their right mind would take 15-28% anytime over 45%.

    CALL THE BENEFICIARIES AND ASK THEM.
    If I know someone has no credibility and I call that person for a ss# for tax reason of any kind; don't you think that person can give any # that comes from a stolen death certificate. Some crooks do that for a living you know. They look at the daily obits. for their preys.

    The form will detract that person if he/she knows there will be federal penalties if they lie. Though, not a deterent for a motivated crook.
    Distributions from a trust/estate in and of themselves don't mean a thing for tax purposes nor do they carry a tax rate to them.
    There is a distinction if you are talking principal or income. There is also a major distinction if the Estate assets do not exceed 3.5 mil. or less.

    2009 $3,500,000(single) $7,000,000 (couple)
    MAXIMUM ESTATE AND GIFT TAX RATES
    YEAR MAXIMUM TAX RATE
    2007 - 2009 45%

    Live and learn Mr. know it all!
  4. #4
    davew128 is offline Senior Member
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    Quote Originally Posted by trust_id_09 View Post
    First let's cut the sarcasm! Second the income in question is from a tax deferred form of investment. And the proceeds of the spread is taxed at a higher rate which is the trust's rate. The same is true for inteest earned on principal of the trust. You are looking at this as if it were capital gains on securities sold.
    No I'm not. When you distribute all accounting income to beneficiaries, unless it is a final year for the entity or you've made certain elections, the only tax the entity pays is on capital gains. THAT MEANS, if there are no capital gains, there is no entity tax.

    Not the case here. Hence the request for his/her ss# since he/she is ain a much lower tax bracket than that of the trust.
    Unless you're doing that person's return YOU DON'T KNOW THAT (and if you did that person's return you wouldn't be needing their SSN). The marginal rates for trusts and individuals ARE THE SAME.

    Besides, it is a marginal amount to that idiot anyways; who happened to be to dumb to realize it. It's a no brainer, anyone in their right mind would take 15-28% anytime over 45%.
    Well since the marginal rates for individuals are the same for trusts, meaning they go up to 36%, I would be cautious about calling them idiots.



    If I know someone has no credibility and I call that person for a ss# for tax reason of any kind; don't you think that person can give any # that comes from a stolen death certificate. Some crooks do that for a living you know. They look at the daily obits. for their preys.

    The form will detract that person if he/she knows there will be federal penalties if they lie. Though, not a deterent for a motivated crook.
    Someone is in need of serious professional help beyond the scope of this forum. Might I suggest appearing on the O'Reilly Factor?? I would caution you about the criminal though. They might be invited to appear and debate you on the show.


    There is a distinction if you are talking principal or income. There is also a major distinction if the Estate assets do not exceed 3.5 mil. or less.

    2009 $3,500,000(single) $7,000,000 (couple)
    MAXIMUM ESTATE AND GIFT TAX RATES
    YEAR MAXIMUM TAX RATE
    2007 - 2009 45%

    Live and learn Mr. know it all!
    Indeed. Especially since estate and gift rates apply to estate and gift taxes, NOT trust income taxes.

    If nothing else, when you call someone else an idiot and use sarcastic terms at least have the common decency to actually be right. Consider it a life lesson.
  5. #5
    anteater is offline Senior Member
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    Quote Originally Posted by davew128 View Post
    The marginal rates for trusts and individuals ARE THE SAME.
    But, Dave, the top marginal rate for trust income kicks in at only $11,150 in 2009 (if I remember correctly).
  6. #6
    davew128 is offline Senior Member
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    Quote Originally Posted by anteater View Post
    But, Dave, the top marginal rate for trust income kicks in at only $11,150 in 2009 (if I remember correctly).
    True, but thats still a much different fact set than our esteemed OP was describing.
  7. #7
    trust_id_09 is offline Member
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    Beneficiaries' personal marginal tax rates

    Unless you're doing that person's return YOU DON'T KNOW THAT (and if you did that person's return you wouldn't be needing their SSN). The marginal rates for trusts and individuals ARE THE SAME.
    No. I am not the party in question's accountant, but the line of work someone is in can dictate approximately what a person makes tax bracket wise.
    And I know it does not exceed 28% for a fact.
    Had you read the OP carefully and here is an excerpt:
    I would much rather paying below 28% than 36%.
    You would have understood what I meant.

    Furthermore, the tax-free threshold (currently $6,000) for the year and I know the trust distributed income will exceed that amount for each beneficiary.
    If the distribution to the beneficiary exceeds his or her tax-free threshold, the excess amount will be taxed at the beneficiary's personal marginal tax rate. Therefore, my point is, the amount each person would pay is virtually nothing when you add it to his/her original taxable income for that fiscal year.
    Hope I made myself clear enough.
    Last edited by trust_id_09; 09-22-2009 at 01:00 PM. Reason: additional detail...
  8. #8
    davew128 is offline Senior Member
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    Quote Originally Posted by trust_id_09 View Post
    No. I am not the party in question's accountant, but the line of work someone is in can dictate approximately what a person makes tax bracket wise.
    And I know it does not exceed 28% for a fact.
    Had you read the OP carefully and here is an excerpt:
    You would have understood what I meant.
    Again, you don't prepare that person's tax return so you cannot KNOW what is on it. For all you know they have lottery income, pension income, investment income, or other entities they derive income from. People in this world do sometimes have sources of income they don't talk to others about but report on their tax return.

    Furthermore, the tax-free threshold (currently $6,000) for the year and I know the trust distributed income will exceed that amount for each beneficiary.
    If the distribution to the beneficiary exceeds his or her tax-free threshold, the excess amount will be taxed at the beneficiary's personal marginal tax rate. Therefore, my point is, the amount each person would pay is virtually nothing when you add it to his/her original taxable income for that fiscal year.
    Hope I made myself clear enough.
    As mud. And it was as correct about the law as your other posts. There is no such thing as a tax-free threshold, and if you're referring to the standard deduction, if this person is working as you state, they've already used it up. In other words, they pay tax at marginal rates for every dollar of trust income you distribute.

    My question for you: You have an accountant, why are you not relying on them because you have some SERIOUS misconceptions about how this works.
  9. #9
    trust_id_09 is offline Member
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    Trying to turn a simple matter into Murky waters...

    Quote Originally Posted by davew128 View Post
    Again, you don't prepare that person's tax return so you cannot KNOW what is on it. For all you know they have lottery income, pension income, investment income, or other entities they derive income from. People in this world do sometimes have sources of income they don't talk to others about but report on their tax return.

    As mud. And it was as correct about the law as your other posts. There is no such thing as a tax-free threshold, and if you're referring to the standard deduction, if this person is working as you state, they've already used it up. In other words, they pay tax at marginal rates for every dollar of trust income you distribute.

    My question for you: You have an accountant, why are you not relying on them because you have some SERIOUS misconceptions about how this works.
    The accountant was the one who requested each beneficiary's ss# to beging with. And, since I am the one hiring him to conduct business for the Trust I then equested it of these beneficiaries.
    My degree is in Computer Science, not in Accounting specializing in Trust & Estate.
    As murky you are to make this to be, here is some required reading you might want to consider: Family Trust Income

    By the way, Denny Crane is a fictional TV character. And though I watch Boston Legal, that does not give me license to practice Law in any way.
    Along the way I digressed!
  10. #10
    davew128 is offline Senior Member
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    Quote Originally Posted by trust_id_09 View Post
    As murky you are to make this to be, here is some required reading you might want to consider: Family Trust Income
    Here's one for you, since apparently everyone but you doesn't understand fiduciary TAX LAW....[url]http://www.irs.gov/pub/irs-pdf/i1041.pdf[/url]

    By the way, Denny Crane is a fictional TV character. And though I watch Boston Legal, that does not give me license to practice Law in any way.
    Denny Crane.

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