Deceased Taxpayer - Taxes Due

[JohnH]

Single Taxpayer in mid-30's had been working as an independent contractor and died suddenly in 2009. Parent is executor and received a 1099 for 2009 year. S/E tax and income tax combined is about $5K. There were no assets to distribute other than a car of minimal net value.

I'm thinking the executor/parent needs to file the return without payment and then contact IRS after assessment is received to explain situation and have account placed in uncollectible status. Is this correct or is there another way it should be handled?

[veritas]

Odd

a single 30 something had a will?

[gkaiseril]

Could be he was intestate and local court appointed parents as executors.

[erchess]

I thought

that if the parents wanted to take title to that car and to their son's personal effects they had to pay his bills including but not limited to taxes.

[JohnH]

I should not have used the word "executor". He died intestate so the personal representative appointed by the court is the administrator. The parent was appointed by the court to dispose of the car and a small amount of cash, total of about $1K including fmv of the car (net of a loan). Parents paid funeral expenses of about $6k and liquidated the assets. Then the 1099 came in the mail.

So the question stands - what to do about the taxes? The administrator has been told by the tax preparer that they must pay the taxes. I disagree.

[veritas]

I found a link

and it doesn't look good.

The parents have to be grieving. This is so wrong.

http://www.helplinelaw.com/article/usa-north%20carolina/340

[JohnH]

Thanks for the link. I had found a similar link which gave the same info. I don't do estate work so I've been picking my way through this one to help out someone I care about (not a client). And yes, you're absolutely right that the parents are devastated by what happened to their child. They don't need this added burden (financial and emotional) which is why I became involved.

It seems clear to me that the administrator does not accept personal liability for the decedent's unpaid taxes simply by serving in that capacity, even if they're a parent. Funeral expenses are a first priority claim in NC, so there's no issue of improper administration of the estate. Even if there were, the administrator could only be held responsible for $1K since that's the total estate.

I just don't understand where the tax preparer gets the notion that the administrator (parent) is responsible for the taxes. I say file the return with no payment and then work it out with IRS. I can't see any outcome other than the account being placed in uncollectible status.

[taxmandan]

I just don't understand where the tax preparer gets the notion that the administrator (parent) is responsible for the taxes.

My thought is that the tax preparer said the executor is responsible to see that the taxes are paid, up to the amount of any estate value, NOT personally responsible to pay the taxes regardless of any estate value. We all know how the clients misunderstand what we tell them.

[JohnH]

That's a valid point and thanks for bringing it up. That did enter my mind and I did quiz them about exactly what the tax preparer told them. We were talking about this in an informal setting so there was plenty of time to hash out the fine details.

They insisted that they understood him correctly - he said they'd have to pay the entire amount of tax even though the estate is as small as it is. I did tell them I'd like to speak with him directly about it - not to score debating points but to be sure everybody's on the same page. I fell certain we'll be able to get it resolved.

[Burke]

The tax preparer, if that is what he said, is absolutely incorrect. And you are correct in your assumption regarding the parents' responsibilities. They may have been appointed administrators to deal with the dissolution of the estate, but they are NOT personally responsible for the deceased's taxes. They only have an obligation to pay such if there are sufficient assets owned by the decedent. I agree with your analysis: prepare the return, file it with a letter, and then deal with the IRS for the taxes due. Follow the NC rules for intestate priority of debt obligations.

[Burke]

and it doesn't look good. The parents have to be grieving. This is so wrong.http://www.helplinelaw.com/article/u...20carolina/340

I reviewed this link. It says nothing about an administrator/executor being personally responsible for any of the decedent's tax or debt obligations. There are rules for insolvent estates and an order of priority as to what is paid and how much is paid in that order.

[DaveO]

Agree with Burke. Just had a case where the widow came in and had a history of correspondence from the IRS. Her husband had died a few years prior. The IRS had prepared a SFR for him after his death as MFS. She didn't prepare or file a return for that year or any year after his death. The IRS was asserting that he owed around $5000 with penalty and interest. A joint return would have dropped it down to about $500 but her filing a MFS return on her own would result in a refund for her. I discussed the case with the IRS and was advised to file a MFS return for her to claim the refund and just keep informing the service center that the husband was deceased until they stopped sending notices.