Federal Tax Liability of a decedent

[Mary Jo Walker]

After the final 1040 was filed the refund was applied to an unknown tax liability from 2005 by the executor of the estate. This liability was not listed as an Estate expense; and all of the assets have been distributed to the beneficiaries. The CSED is still open due to late filing of the tax return. What are the options for settling this tax liability? Who is liable? Any guidance would be appreciated.

[Eric Green]

Mary-Jo,

The IRS applied the refund to the earliest year, and there is a potential tax liability. The administrator/executor faces personal liability for distributing assets if there is a tax liability. I would have them try and get money back from the beneficiaries to pay the liability, otherwise they may be liable themselves.

The lesson here is when it comes to an estate, the executor/administrator needs to file all the returns, make a request for prompt assessment (IRS Form 4810, found here: https://www.irs.gov/pub/irs-pdf/f4810.pdf) and wait at least 18 months before distributing assets.

Eric

• This reply was modified 1 year, 9 months ago by Sandi Leyva.

[Terrence Power]

I just dealt with a decedent issue on an offer and discovered that any POA in effect is deemed invalid as of the date of death. The IRS told me I had to get a new one signed by the executor of the estate on behalf of the decedent. The estate was not probated and there is no executor, all assets were JTWROS. Not sure what to do now.

[Mary Jo Walker]

Was there a will with an administrator assigned?

[Eric Green]

Terry, most states have a procedure where you can get an appointment letter as an administrator without opening an entire estate. There is at least in MA, CT and NY. I would check with your state.

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