Understanding IRS Audits of Deceased Individuals
The Internal Revenue Service (IRS) has the authority to audit deceased individuals just as they would living taxpayers. This can be a confusing and challenging process for the estate executor or loved ones responsible for handling the deceased person’s tax affairs.
Who is Responsible for Filing Taxes for a Deceased Person?
The executor or administrator of the estate is typically responsible for filing the deceased person’s tax returns. If no executor or administrator has been appointed, a surviving spouse, child, or other immediate family member may need to assume this responsibility.
Income Tax Liability After Death
Income earned by a person up until the date of death is subject to taxation. The executor or survivor must file a tax return for the deceased person, reporting income from the beginning of the taxable year until the date of death.
IRS Audit Process for Deceased Individuals
The IRS has a six-year statute of limitations for tax audits. This means that the IRS can audit a deceased person’s tax returns for up to six years after the date the returns were filed or the date the taxes were due, whichever is later.
The IRS uses a computerized scoring system to flag potential discrepancies in tax returns. If the system identifies any issues with a deceased person’s returns, the IRS may initiate an audit.
Reasons for IRS Audits of Deceased Individuals
The IRS may audit a deceased person’s tax returns for the same reasons they audit living taxpayers, including:
- Suspected misreporting of income or deductions
- Mathematical errors or omissions
- Failure to file a tax return
- Suspected tax evasion or fraud
Consequences of an IRS Audit
If the IRS identifies any discrepancies during an audit, the estate or beneficiaries may be required to pay additional taxes, interest, and penalties.
Steps to Take if You Receive an IRS Audit Notice for a Deceased Person
If you receive an IRS audit notice for a deceased person, it’s important to take the following steps:
- Review the Notice: Carefully read the notice to understand what actions are required.
- Gather Financial Documents: Collect all relevant financial documents, such as bank statements, investment records, and tax returns.
- Contact the IRS: Reach out to the IRS to discuss the audit and provide the requested information.
- Consider Professional Help: If you’re unfamiliar with tax law or the audit process, consider seeking professional assistance from a tax attorney or accountant.
Seeking Professional Help
Dealing with an IRS audit for a deceased person can be complex and stressful. It’s advisable to seek professional help from a qualified tax attorney or accountant who can guide you through the process, protect the estate’s interests, and minimize any potential tax liabilities.
Deceased Person Tax Return
FAQ
Will the IRS audit a deceased person?
Can the IRS collect from a deceased person?
Who signs a tax return for a deceased person?
Can a deceased person get a tax refund?
Can the IRS audit a deceased person’s taxes?
This obligation does not at the moment that they pass away. The IRS has the right to pursue taxes owed by deceased individuals and audit the estates of people who are no longer living. You can protect the estate of a friend or loved one by knowing under what circumstances the IRS can audit a deceased person’s taxes.
Does a deceased person owe income tax?
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.
Can the IRS audit your estate after you die?
People are not safe from a tax audit even after death. When you are the heir or executor of an estate, you should learn under what circumstances the IRS can audit it.
How long does a deceased person have to file taxes?
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.