How to Prepare a Pennsylvania Inheritance Tax Return

In Pennsylvania, an inheritance tax applies to estates inherited under a will or the state's intestacy laws. The burden for filing the tax falls first on the estate executor or named representative, and then on the person inheriting if the executor doesn't file. For deceased residents of Pennsylvania, the tax applies to all tangible and real property located in the state at the time of death plus what is known as "intangible" property, such as bank accounts, stocks and bonds, etc., no matter where they are held. For deceased non-residents, it applies only to real and tangible property located in the state.

Step 1

Visit the Register of Wills Office at the county courthouse of the deceased; your local county courthouse, if you are a Pennsylvania resident; or call 1- 800-362-2050 to order REV- 1500 forms and instructions for deceased Pennsylvania residents or REV - 1737 for deceased non-residents.

Step 2

Complete the cover sheet with all necessary information that will include information such as the deceased's address, the contact person for correspondence and questions, and the deceased's Social Security or Tax ID number. You will also blacken the ovals that apply. For example, this will probably be an "Original Return," which means you will blacken that oval.

Step 3

Fill out Schedule A if the decedent held any real estate or a partial interest in real estate on the date of death. You will need to include an appraisal of the fair market value and county tax assessment. You will also need to include copies of deeds if the deceased owned only a portion of the property.

Step 4

Include Schedule B if the decedent owned stocks and bonds, either individually or jointly with someone else. Most of the information you need will be available on the account statements for each investment. However, you will need to provide the date-of-death value rather than the most recent value. You can usually find this on the site of the transfer agent or on various financial websites. For weekends and holidays, take an average of the high and low price on the preceding and next trading days.

Step 5

File Schedule C if the deceased owned a business, whether it was a corporation, partnership or sole proprietorship. The purpose is to value the company as closely as possible on the date of death so you might also need to include information on how any stock was valued along with corporate tax returns for the year of death and the four previous years. If the business was jointly owned, include a Schedule F.

Step 6

File Schedule D only if the deceased held a receivable. This is money owed the deceased, not money the deceased owed. It would include the original amount of the loan and the amount owed. Follow that by completing Schedule E, listing all other property such as clothing, jewelry, valuable collections and bank accounts -- all valued at date of death. As of 2012, any individual item valued at more than $3,000, or any collection valued at $10,000, will require an appraisal.

Step 7

List on Schedule F any property included on other schedules owned jointly with a right of survivorship. Don't include property the deceased owned jointly with her spouse.

Step 8

Complete Schedule G for property that did not go through probate. This would be assets such as an IRA that passed directly to a named beneficiary. You would also include on this schedule any transfers of property within one year of the decedent's death that exceeded $3,000.

Step 9

Deduct from the taxable inheritance allowable expenses listed on Schedule H -- Funeral Expenses and Administrative Costs; and Schedule I -- Debts of Decedent, Mortgage Liabilities, & Liens. Next, complete Schedule J, where you will list the beneficiaries of the estate along with their shares. You will also include any portions of the estate that would go into trusts.

Step 10

Include Schedule K only if the decedent had assets that would need to be valued by an actuary. Examples would be term certain annuities. The remaining schedules would apply to special situations such as remainder trusts and spousal trusts.

Step 11

Carry forward the "Recapitulation" amount on each of the schedules to the proper line on the Cover Page. Follow all instructions. Line 14 will be the amount of the estate subject to Pennsylvania Inheritance Tax. For the most part, spouses will not owe tax. As of 2012, lineal descendants pay 4.5 percent, siblings pay 12 percent and nonlineal descendants pay 15 percent. File the return in the county where the decedent lived. If the decedent was a non-resident, file in the county where the property was located or with the PA Department of Revenue.

Items you will need

  • PA Form REV - 1500
  • Investment and bank account statements
  • Date-of-death values
  • Written appraisals of required items, if applicable
  • Copy of probated will
  • Trust documents, if applicable

Tips

  • There is a 5 percent discount for inheritance tax payments made within three months of the date of death.
  • You might be able to claim a family exemption of $3,500.
  • Include a copy of the decedent's will along with any trust documents and supporting documents or appraisals.

Warnings

  • Safe deposit boxes must be inventoried by the estate representative in the presence of an official of the financial institution before any items -- except wills and instructions -- can be removed.
  • The return must be filed no later than nine months from the date of death. Late filings incur a penalty of 25 percent of the tax due or $1,000, whichever is less.
  • It is strongly suggested that you contact a lawyer or accountant to determine if and when you need to file Pennsylvania Inheritance Tax and to assist you with the filing.

About the Author

Nancy Cross is a certified paralegal who has worked as an employee benefits specialist and counseled employees on retirement preparation, including financial and estate planning. In addition to writing and editing, she runs a small business with her husband and is a certified personal trainer with the Aerobics and Fitness Association of America (AFAA).

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