Can the IRS Audit a Deceased Person? A Comprehensive Guide to Post-Mortem Tax Audits

The passing of a loved one brings forth a multitude of legal and financial responsibilities, including the management of their tax affairs. One question that often arises is whether the Internal Revenue Service (IRS) can audit a deceased person. This comprehensive guide will delve into the intricacies of post-mortem tax audits, exploring the circumstances under which they occur, the responsibilities of the deceased’s estate, and the steps involved in responding to an IRS audit.

Can the IRS Audit a Deceased Person?

Yes, the IRS can audit a deceased person. The IRS has the authority to audit tax returns filed by deceased individuals for up to six years after the date of death. This means that the IRS can review the tax returns filed by the deceased person in the years leading up to their death to ensure accuracy and compliance with tax laws.

Circumstances Triggering an IRS Audit of a Deceased Person

The IRS may initiate an audit of a deceased person’s tax returns if it identifies any discrepancies or potential errors in the returns. Some common triggers for an IRS audit include:

• Mathematical errors: Mistakes in calculations or data entry on the tax return.
• Unreported income: Failure to report all sources of income, such as wages, self-employment income, or investment earnings.
• Excessive deductions or credits: Claiming deductions or credits that are not supported by proper documentation or exceed allowable limits.
• Estate tax issues: Questions about the valuation of assets or the distribution of the estate.

Responsibilities of the Deceased’s Estate

Upon the death of an individual, their estate becomes responsible for managing their tax affairs, including responding to any IRS audits. The executor or administrator of the estate is typically responsible for:

• Gathering financial records: Collecting all relevant financial documents, such as bank statements, investment records, and tax returns.
• Filing tax returns: Ensuring that all required tax returns are filed on behalf of the deceased person, including the final income tax return and any estate tax returns.
• Responding to IRS inquiries: Cooperating with the IRS during an audit and providing requested documentation.
• Paying any additional taxes: If the audit results in additional taxes owed, the estate is responsible for paying them.

Steps Involved in Responding to an IRS Audit of a Deceased Person

If the IRS initiates an audit of a deceased person’s tax returns, the executor or administrator of the estate should take the following steps:

1. Review the IRS notice: Carefully review the IRS audit notice to understand the specific issues being questioned.
2. Gather documentation: Collect all relevant financial records and documentation to support the deceased person’s tax returns.
3. Contact a tax professional: Consider seeking guidance from a tax attorney or accountant who specializes in estate and trust taxation.
4. Respond to the IRS: Submit a written response to the IRS within the specified timeframe, providing the requested documentation and explanations.
5. Attend an audit meeting: If necessary, attend an in-person or virtual meeting with the IRS auditor to discuss the audit findings.
6. Negotiate a settlement: If the audit results in additional taxes owed, negotiate a payment plan or settlement with the IRS.

Understanding the IRS’s authority to audit deceased persons is crucial for executors and administrators of estates. By being aware of the circumstances that may trigger an audit, the responsibilities involved, and the steps to take in response, you can effectively manage the tax affairs of the deceased and ensure compliance with IRS regulations.