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Parents passed.

Was told I need a CPA for final filing.

I gave a $350 retainer.

Because my siblings were on the deed to protect the house from nursing home I'm told I need to file a gift return for 3 years ago.

That's another $450 retainer.

Then a final fiduciary for 2021.

Question:. Is this typical of this type of return? I feel this is extreme for old people who were living social security check to check.

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    Condolences on the loss. The final filing for your parents isn't any different than filing for any year when they were alive. The complication is if your parents were on medicaid and/or how was the nursing home being paid, i.e. the gift return modification. Without knowing the state/locality and size of the estate, fiduciary returns are required as whatever assets were in their name becomes part of the estate and distributed per local probate/will. Mar 16 at 1:14
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    Why not post this as an answer? Sounds like a good one!
    – RiverNet
    Mar 16 at 1:58
  • @Morrison Chang No nursing home, I went on the house to protect it. Estate is under $500k. Do you think the cost of the CPA is reasonable? Plus it's just a retainer at this point.
    – Marinaio
    Mar 16 at 12:30
  • The issue is a lot more complicated than the OP believes. The siblings "were on the deed" and "I went on the deed" suggests that the house was the joint property of the parents and children, or the property of the siblings alone (in which case the parents deeded the house to the siblings (three years ago?) and so needed to file a gift tax return at the time of the gift. Mar 17 at 15:12
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Condolences on the loss.

TLDR: I don't know if its fair or not, but at least understand what you'll need to be paying for.

My guess is that you're the Executor/Administrator of the estate.

You say the Estate is under $500K. I'm going to assume that you are not in state with inheritance or estate taxes (some states base on percentage rather than have a minimum level for taxes).

You also don't say if you are in a HCOL area or not, regardless fees vary.

Realize that everyone: the lawyers, the accountants, the appraisers and anyone else are there to serve you. You are hiring them for their knowledge and time to get you through the process. As such, if you feel that you are being taken advantage of do shop around. While the lawyer may have given you the outline of what needs to happen, quite a few parts need to be done by the Executor. Once you know what needs to be done, you can ask around with the same set of requirements and get pricing.

Back to the question:

Was told I need a CPA for final filing.

The final filing of the 1040/state income tax in the year of death of the decedent is no different than when they were alive. If they were living off of social security, I'm going to assume there wasn't that many assets (bank accounts, stocks, mutual funds) which required complicated record keeping. If they did, well your job is to find everything, assets and debts.

If you comparing the price to online service, the extra cost may/probably be for the physical paperwork that needs to be sent since a copy of the death certificate is required. Depending on how comfortable you are doing your parent's taxes, it can be done, it just takes time which you may or may not want to spend. If there is a tax liability, the estate has to pay it. If there is a refund due, it would be your job to chase it down with the respective tax authorities.

I'm told I need to file a gift return for 3 years ago.

If you need to 'adjust' old returns you'll need to authorized (along with designated agent on your behalf) to deal with the IRS, which I think is covered by Form 56. And a similar Power of Attorney submission for the state tax authority if required. So that will be a 1040-X and one for the state? assuming that no tax liability changes for the decedents.

a final fiduciary for 2021

I'm not quite sure if you are referring to IRS Form 706 (Estate Tax Return) or Form 1041 (Estate Income Tax Return). The size of the estate is lower than the requirement for filling Form 706, so I'm going to assume Form 1041. Regardless a professional date of death valuation on the house should be done.

If there is income still going to your parents, you are going to have to create bank and possibly a brokerage account so that they get under the Executor's control in order to pay debts and distribute to beneficiaries. The Estate will need a tax ID (EIN) and file federal/state taxes on Estate income generated by assets, Form 1041, and provide a Schedule K-1 to each beneficiary. Hopefully only one year is needed.

Depending on local rules, you may have to wait a period before distribution of assets, check with a lawyer. You may also want to transfer assets directly from your parents names to the beneficiaries.

While it seems dry, do go through the IRS documentation Publication 559 (2020), Survivors, Executors, and Administrators. An Executor/Administrator's job is to project manage the assets/debts of the decedent and follow the instructions of the will/probate process.

Also realize that I'm assuming that there is agreement among the beneficiaries as any legal action is a burden on the Estate, i.e. lawyer fees, which means less to distribute.

If perhaps the amount of cash in the estate is limited (house rich / cash poor), the Executor would normally be able to either sell the house (probably undesirable in your case) or negotiate with the beneficiaries (your siblings) as to how much to 'loan' the Estate until the Estate can be closed. The IRS/state tax authority only cares about getting its due taxes and the courts only care that everyone is satisfied.

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