Can my law firm’s tax information be used to receive surplus funds on behalf of my client? – North Carolina

Short Answer

Usually, the Clerk of Superior Court pays surplus tax-sale proceeds to the person legally entitled to them (or, if deceased, to the decedent’s estate through a personal representative). A law firm may receive the check to its trust account if the clerk allows it and the claimant gives written authorization, but the firm’s tax ID does not replace the claimant’s required tax ID. The clerk typically requires a W‑9 (or AOC vendor form) for the firm, the individual claimant, and an estate’s EIN when an estate is involved.

Understanding the Problem

North Carolina question: can a law firm use its own taxpayer information so the Clerk of Superior Court issues surplus tax‑sale funds to the firm (for deposit to trust) while the claim is for an individual and for a decedent’s estate? The county clerk has confirmed the funds are returned and pending distribution and has requested IRS forms for the firm, the individual, and the estate. The filer needs the correct email address to submit the forms.

Apply the Law

Under North Carolina law, surplus proceeds from a tax foreclosure are distributed by order of the court through the Clerk of Superior Court to those legally entitled. When an owner is deceased, payment is made to the decedent’s estate through a qualified personal representative or, in limited small‑estate situations, via the affidavit process. Clerks require taxpayer identification for the payee(s) they disburse to and for 1099 reporting. A law firm may be the remittance address/payee to its trust account if the clerk approves and the claimant authorizes, but the underlying claimant’s TIN (and an estate EIN, if applicable) is still required. The clerk may not administer funds owed to a decedent in excess of a statutory threshold without an appointed personal representative or affidavit process.

Key Requirements

• Rightful payee identified: Surplus goes to the person legally entitled (or a decedent’s estate via a qualified personal representative).
• Correct taxpayer IDs: The individual’s SSN and the estate’s EIN are required; a firm’s EIN may be required if a check is issued to the firm’s trust account, but it does not replace the claimant’s TIN.
• Estate setup if owner is deceased: If surplus payable to a decedent exceeds the small‑estate limits handled by the clerk, a personal representative must be appointed; the estate must use its own EIN, not the decedent’s SSN.
• Clerk forms and approval: Clerks commonly require an IRS Form W‑9 and an AOC vendor form (often called FS‑9) for each payee before issuing checks.
• Forum and threshold: Distribution occurs in the Clerk of Superior Court in the county of the tax case; the clerk cannot administer more than a limited amount directly when funds are owed to a decedent without opening an estate.

What the Statutes Say

• North Carolina Gen. Stat. § 105-374 (Tax lien foreclosure—action) – Court oversees sale and distribution, including surplus.
• North Carolina Gen. Stat. § 105-375 (Tax foreclosure—in rem) – Surplus proceeds are paid to the person entitled under court direction.
• North Carolina Gen. Stat. § 28A-25-6 (Payment to clerk of money owed decedent) – Limits clerk administration and often requires a personal representative above small amounts.
• North Carolina Gen. Stat. § 116B-67 (Claims for unclaimed property) – Governs claims if funds are held by the State Treasurer, separate from court‑held surplus.

Analysis

Apply the Rule to the Facts: Because the county clerk holds surplus tax‑sale proceeds, the clerk will pay the person legally entitled. For the individual claimant, the clerk will require that person’s W‑9 with SSN. For the decedent’s estate, the clerk will require an estate EIN (not the decedent’s SSN) and paperwork showing the personal representative is in place if the amount exceeds small‑estate limits. The law firm may receive the check to a trust account if the clerk agrees and the claimant authorizes, but the firm’s tax info does not substitute for the claimant’s or the estate’s required TINs.

Process & Timing

1. Who files: The entitled claimant (and, if applicable, the estate’s personal representative), often through counsel. Where: Clerk of Superior Court in the county where the tax foreclosure occurred. What: A motion/petition for disbursement of surplus proceeds in the tax case file, plus IRS W‑9s and the clerk’s vendor form (often FS‑9) for the individual, the estate (EIN), and the firm if payment will be issued to trust; include Letters for the personal representative and a written authorization to pay the firm’s trust account. When: After sale confirmation and when the clerk schedules review or hearing; local timing varies.
2. Clerk review/hearing: The clerk verifies who is entitled, confirms estate authority if the owner is deceased, and confirms tax IDs. If the funds payable to a decedent exceed the amount the clerk can administer directly, the clerk will require opening an estate or using the small‑estate affidavit where permitted.
3. Disbursement: The clerk enters an order and issues checks. If a check is issued to the firm’s trust account, the clerk typically still reports under the claimant’s or estate’s TIN. Retain copies of all forms for closing and tax reporting.

Exceptions & Pitfalls

• Using only the firm’s EIN: This does not replace the claimant’s required TIN and can cause incorrect 1099 reporting or backup withholding.
• Estate identification: Do not use the decedent’s SSN for an estate; obtain and use an estate EIN. The clerk may refuse payment without it.
• Administration threshold: If the surplus payable to a decedent exceeds the clerk’s small‑amount authority, expect to qualify a personal representative rather than routing payment directly.
• Competing claims: Lienholders or other parties may assert priority; the clerk may require notice and a hearing before distribution.
• Submission logistics: Each county uses its own submission process and email inbox for the civil/foreclosure division. Call the Clerk of Superior Court for the county of sale to confirm the correct address before sending W‑9/FS‑9 forms.

Talk to a Surplus Funds Attorney

If you’re dealing with surplus funds from a North Carolina tax sale and need to coordinate payment through an estate or a law firm trust account, our firm has experienced attorneys who can help you understand your options and timelines. Call us today at 919-341-7055.

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.