How Long Can the IRS Pursue the Estate of Someone Who is Deceased?

 Posted on April 27,2018 in Taxation Law

It is often said that death and taxes are the only two things that people are certain to experience. However, one’s tax obligations do not end with one’s death. When someone dies, income taxes may still be owed on his or her estate. Moreover, estate taxes or inheritance taxes may also apply. In order to ensure that taxes are filed correctly, it is important to have a strong knowledge of tax law.

Filing Taxes for a Deceased Person

After a person dies, the administrator of his or her estate must file a tax return and report all income he or she earned prior to the date of his or her death. Typically, the administrator will file Form 1040, and he or she may also be required to file tax returns for any previous years in which the deceased person failed to file a return. If necessary, the estate administrator can obtain documents related to the deceased person’s income and taxes by filing IRS Form 4506-T (Request for Transcript of Tax Return).

In addition to the deceased person’s individual income tax, he or she may also owe tax on income earned by his or her estate. If the assets owned by the deceased person generated more than $600 in annual income prior to being distributed to the deceased person’s heirs, an income tax return (Form 1041) must be filed for the estate.

Finally, the estate administrator may need to file an estate tax return (Form 706) if estate taxes apply to the transfer of the deceased person’s assets to his or her heirs or to ensure availability of a deceased spouse’s unused exemption. Following the passage of the Tax Cuts and Jobs Act of 2017, the estate tax exemption is $11.2 million; therefore, an estate tax return will only be necessary for estates worth more than this amount.

Statute of Limitations for Collections and Audits

If a deceased person owes taxes in any years prior to his or her death, the IRS may pursue the collection of these taxes from the estate. According to the Internal Revenue Code, the Collection Statute Expiration Date (CSED) for taxes owed is 10 years after the date that a tax liability was assessed.

In addition to collecting taxes, the IRS may also audit the tax returns filed by a deceased person in the years prior to his or her death. Typically, the statute of limitations for tax audits is three years. However, in cases in which a person’s income was underreported by at least 25 percent, this time limit may be extended to six years.

Contact a San Jose Tax Law Attorney

If you have been named as the administrator of a deceased person’s estate, John D. Teter Law Offices can help you understand your responsibilities for filing tax returns and paying any taxes that are owed. We will work with you to address issues related to collections or audits while helping you minimize the estate’s tax obligations. Contact a San Jose, CA tax lawyer at 408-866-1810.

Sources:

https://www.irs.gov/businesses/small-businesses-self-employed/deceased-taxpayers-filing-the-final-returns-of-a-deceased-taxpayer

https://www.irs.gov/businesses/small-businesses-self-employed/deceased-taxpayers-understanding-the-general-duties-as-an-estate-administrator

https://www.irs.gov/irm/part5/irm_05-001-019

https://www.forbes.com/2009/10/08/IRS-tax-audits-statute-limitations-personal-finance-wood.html#774066513d2f