What Happens To IRS Debt When You Die?

Are you wondering what happens to the tax debt of a loved one after their death? Unfortunately, any outstanding amount owed isn’t “automatically” wiped clean from the record when a taxpayer passes away.  In this post we’ll discuss the general process and give you some tips on how to navigate some of the difficult steps one may encounter.

The role of the executor of the estate.  When a person dies, someone may apply to the court requesting that they be allowed to settle the estate.  This person could be an heir or the executor of the estate, and is referred to as the estate administrator.  Once they have officially been appointed by the probate court, Letters Testamentary are issued to authorize them to act on behalf of the deceased.   The estate administrator is responsible for collecting all of the deceased’s assets such as cash, bank accounts, investment accounts, personal property and titles to real estate.  They then will ensure that all creditors are paid and then distribute the remaining assets to the heirs.

For example, if you are the estate administrator when your father or mother passes away, you can’t simply distribute their assets to the people named in the will immediately. First, you need to pay off any debts your parent owed at the time they died.  If that parent owed taxes to the IRS, they will be included in the debts that must be paid.

Income generated before and after date of death.  Sometimes, loved ones may be confused as to what must be included on which tax return.  Here, we hope to add some clarity.  Income earned up through the date of passing is included on the taxpayers final Form 1040.  Any income generated after the day of death is earned by the deceased’s estate.

Filing of tax returns.  The estate administrator is the person who is responsible for ensuring that all income tax returns for the deceased have been filed.  This includes the final income tax return for the year of death. In this post on our sister site, we discuss how to file a deceased persons tax return.

To find out whether the deceased filed all income tax returns before his death, the estate administrator will have to look through the deceased’s personal records.  They can also request information from the IRS to not only check return status, but get missing data (i.e. W2s, 1099s, 1098s, etc) needed to file returns.  Check this page on the IRS’ website to learn more and request data.

If the estate earns money that is taxable, either from interest, dividends or rental income, these taxes are paid from the estate.  According to the IRS, an estate administrator must file an income tax return for an estate if its assets generate more than $600 in income per year.  This is done via IRS Form 1041.

IRS taxes owed at date of death.  After you review the deceased’s personal papers and correspondence or you file any outstanding income tax returns, you may discover that your loved one still owes taxes to the IRS.  A public records search may reveal that the IRS has already filed a Notice of Federal Tax Lien against the deceased’s home, vacation property, car or other property. The tax lien is official notice that the deceased owes back taxes. The outstanding amount will be deducted from the proceeds of their remaining assets to pay their taxes.

Do relatives have to settle unpaid taxes with personal funds?  When a decedent’s assets are insufficient to cover his/her federal income and gift tax liabilities, relatives are generally not responsible for the remaining balances. However, there are some exceptions to this.  There are payment obligations for the following individuals when tackling a decedent’s debt:

  • Anyone who co-signed for a loan with the decedent,
  • Anyone who was a joint account holder with the decedent,
  • Spouses in the community property states of Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.  Community property from a marriage can be put toward debt obligations, but spouses aren’t responsible for debts that predate the marriage.
  • Residents of states where law requires a surviving spouse to pay off some of the debts—namely health care expenses, and
  • Anyone who shares in any debt of the decedent

Additionally, an executor could be held personally accountable for the tax bill if:

  • The executor distributes assets to heirs and beneficiaries before paying the taxes,
  • The executor pays off other debts of the estate before paying the tax liabilities, or
  • The executor is aware of the insufficient funds and inability to pay the taxes and spends the assets otherwise.

If you still need more information on this topic, feel free to see the Deceased Persons – Probate, Filing Estate and Individual Returns, Paying Taxes Due page at the IRS’ website.

Solve Your Tax Trouble on National Get Out of The Doghouse Day

Time to get out of the dog house!

If you have “tax problems” then there is no better day to start dealing with them than National Get Out of The Doghouse Day! No, this is not some dreamed up holiday to sell greeting cards and it is actually real. Don’t believe us? Then check out this post over at the National Day calendar and you’ll see that it’s on the third Monday of July. So if you’re not sure how to get out of the dog house with the IRS or the state tax authorities, then here are 5 things you can do:

Open your mail.

When clients come to us to tackle their back taxes, many will often have several if not a dozen (or two) unopened letters. These may be from the Internal Revenue Service (IRS) of their state department of revenue. While many feel that not opening the letters keeps the problem at bay, it can actually make things worse. Did you know that many times when the IRS is attempting to assess a tax to someone, that they have to give them a chance to disagree? But there often comes a time where they give you a window, say 90 days, before what they propose becomes reality. If you fail to respond, you can get stuck with something that isn’t actually reality.

So the single best thing you can do to solve your tax problem is open your mail AND read it. What the letter says is actually not as bad as you think. Plus, there is no way that opening your mail is going to make the situation worse!

Address any unfiled tax returns.

One of the biggest tax cases that we worked on involved a taxpayer who had not filed since 1999. It was 2014 when we were getting involved with their matter. That’s 15 years of unfiled taxes! But don’t worry, according to the IRS Data Book SOI Tax Stats, there were over 13.1 million taxpayers with unfiled returns. So if you have unfiled returns, then know that you are not alone.

People fall behind on filing their tax returns for many reasons. Health issues, death of a loved one, fear, procrastination all have a place in keeping people from filing. But the one thing we see come up routinely is “I did’t file because I know I owe and I can’t pay it.” While this may be a true statement, it shouldn’t stop one from filing. Filing on time is best, but filing late is better than not filing. Similarly, not paying your taxes isn’t good, but paying late is better than not paying at all. There are penalties for not filling and not paying, but they are only calculated ONCE YOU FILE. And if you can’t pay what you owe? We’ll the IRS is always willing to set up a payment plan (installment agreement) with you to settle up.

If you have unfiled returns, you might want to talk to a tax advisor (see last point) prior to filing. While it may seem “correct” to file all of the unfiled tax returns, it may not be needed. While the IRS can “technically” ask for the last 10 years of unfiled returns, it often doesn’t. Furthermore, if you are owed a refund on any of those unfiled returns, the IRS will only issue it for the last 3 years. Anything older than that will be refortified due to the statute of limitations. As such, a tax advisor can help you determine what returns need to be filed to help you get back into the good graces of the IRS or the state.

Identify the root cause of your problem and face it head on.

We’ve all heard that insanity is doing the same thing over and over expecting to get a different result. Well, if you keep finding yourself in tax trouble, maybe you should figure out what is not working and change it. For example:

  • Have more taxes withheld from your check by decreasing your withholdings on your W4
  • Don’t claim “exempt” on your W4 unless you ARE actually exempt from paying income taxes (hint – most people aren’t exempt)
  • Start paying estimated taxes if you are self employed or your income is reported to you on a Form 1099-MISC or Form 1099-K
  • Withhold from your retirement income or social security if you are retired and constantly find yourself owing the government
  • Make sure that you are claiming all the deductions and credits you are entitled to
  • Review your filing status and make sure that you are using the one that is most advantageous to your situation (e.g. Head of Household if you are a single parent)

Reach out to the tax authorities.

Putting your head in the sand is not going to solve the issue. If you contact the IRS, they can tell you the current status of your account as well as what they want you to do to solve your tax matter. For example, they can tell you want years they want you to file and even give you copies of the tax records you need to file them if you’ve lost your records (it’s called a Wage & Income Transcript).

To reach out to the IRS, start with the last notice that you’ve received. It will have an address on the top left hand corner and a contact name and/or phone number in the top right hand corner. This will be the best contact to use because the folks at that number will understand what’s going on with your account as of now.

But if you’ve lost the notice or you have other issues, you can call the IRS at 1-800-829-1040, Monday – Friday, 7:00 a.m. – 7:00 p.m. your local time. If you’re calling about a business tax account, call 1-800-829-4933, Monday – Friday, 7:00 a.m. – 7:00 p.m. your local time. If you have a hearing impairment, call 1-800-829-4059 (TDD), Monday – Friday, 7:00 a.m. – 7:00 p.m. your local time.

Find a qualified tax advisor if needed.

Many people (approximately 40%) use software to prepare their tax returns. But if you get into tax trouble, a qualified tax advisor can be well worth their weight in gold. We don’t recommend that you shop for one based on price, but we do recommend that you find a person/firm that is open AFTER April 15th. Remember, the IRS doesn’t typically contact you during tax season and the notices associated with their matching program typically are sent between March and October following the year the return was due (e.g. 2019 for TY 2017 returns that were due in calendar year 2018).

To that end, you want to find someone who:

  • understands tax (i.e. filing returns), tax debt issues and has experience resolving YOUR particular situation
  • has the credentials to represent you before the IRS so you don’t have to ever speak to them (e.g. EA, CPA, JD)
  • has a good personality fit with you as the two of you will have to work closely with one another

Need tax help?

We routinely help taxpayers get current and compliant and enter into resolution options with the IRS or state. Do you need help? Feel free to check out this page of our site then shoot us an email or give us a call. The sooner you do, the sooner you can but your tax nightmares behind you and get out of the doghouse!

Our 10th Year Anniversary!


Thanks for the past 10 years!

Thanks for the past 10 years!

So this tax season was a little more challenging than anticipated; thus the reason this post is coming out in October.  Needless to say, back on September 14, 2005 Wilson Rogers & Company came into existence.  That means that 2015 marks 10 years of us being in business!  A lot has happened in that time frame.  So with this post, we thought we would not only recap our history, but just how we were able to make it that long.

So after years of Jared getting “hey, your’re an accountant, I have a tax question for you.” he and Aaronita Wilson decided to start a tax company.  “What are we going to call it?” was the question for a while.  “How about we call it Rogers Wilson” Aaronita would say.  “Nah, how about Wilson Rogers?” Jared replied.  “Kind of sounds like a person.  Some estately dude on a horse playing polo.  It also sounds like another tax company we know…”  And with that, Wilson Rogers & Company took form.

This was the first year that we actually started doing returns for pay.  Some of the key highlights:

  • Mr. Asberry becomes “client number one” by sending us his information.
  • Mr. Simpson becomes the first transmitted return as he was quicker to process than Mr. Asberry!
  • Jared and Aaronita get married on September 22, 2006, thus effectively removing a person named “Wilson” from the company.  Don’t worry, people still ask to speak to Wilson Rogers when they come to the office!

These were the “slow years” for the most part as there really wasn’t much that changed.  Client levels stayed pretty consistent and revenues were largely flat.  This was primarily due to the fact that both Aaronita and Jared maintained full time jobs within Corporate America.  This would start to change in the following year.

Sometime towards the end of 2011, the decision was made that Jared would leave Corporate America to head up our first “retail” office.  Up until this point, all the tax returns were done “in house” by making appointments to pick up documents, preparing the returns at night and then providing the completed return to the client at a later date.  2011 was filled with decisions about health insurance, resignation dates and how to outfit the new office.  Somehow, someway, it all managed to come together.

Tax Season? Ready, Set, Go!

Tax Season? Ready, Set, Go!

So this was the first tax season with the new office.  If you want to read the recap on how it went, you can check that out here.  Some of the things that you won’t see in this post:

  • Mr. Campbell had the honor of becoming “retail client number one” on a cold day in January.  He had all his paperwork…we didn’t have the nice frilly folders to give him his tax return in. Oh man…the early days!
  • At the same time we were opening the office, Jared was moonlighting with the fine folks of Intuit with their Turbotax Ask A Tax Expert (ATE) team.  It was also the year that he broke the wrist on his dominant hand and had to finish out tax season using his left hand.  Talk about bad handwriting!
  • We also took many steps into the marketing world to help get the word out.  One of these included developing relationships with sites like Teaspiller (which was later acquired by Intuit)

So we survived another retail office tax season.  That recap can be found here.  The one standout item for this year was that Teaspiller was purchased by Intuit and folded into the TurboTax brand.  What that did was drive additional tax preparation business to us that was above and beyond what we had projected.  It also continued Jared’s relationship with Intuit, which further broadened in late April when he became certified as a Quickbooks Proadvisor.

This was the year that we hired “employee number one” so that Jared could have a little help.  You can read all about Stephanie in a little interview that we did here.  If you want to read about the season, that is located in this post.  That post will also talk about how we began using bus benches to advertise to local traffic in our area!

This was our fourth tax season with the office, and man did things really pick up.  They picked up so much that we hired Patricia as “employee number two” to keep up with things.  This was also the year that we launched www.fileoldtaxreturns.com to offer those needing to file older tax returns an option to do so.

How Did We Survive 10 Years?
Everyone knows the statistic that most businesses fail to make it to the 5 year mark.  While we have been lucky enough to avoid the top 5 reasons businesses fail, we must admit that it takes a little more than that to last for 10 years.  So what are the keys to the castle?  In summary we think:

  • Provide good service.  If you don’t do that, you’ll be lucky if you last beyond a year.
  • Value your customers. We have wonderful customers and we try to let them know that as frequently as possible.  Without them, there would be no Wilson Rogers & Company.
  • Stand out from your competitors.  We’ve all heard that insanity is defined as doing the same thing over and over and expecting a different result.  If you look, sound and act just like your competitors, expect to get their results – average!  So be bold. Do things differently. Give the public what they want, not what YOU think they want.
  • Make adjustments when necessary.  Getting to 10 years has not been a straight line drive.  We’ve had to adjust and pivot along the way.  Have we made mistakes? You bet! Have we learned from them? Continuously.  The key is to make adjustments when needed, forget the past and try to do better in the future.  If you can do that (combined with the above points), then maybe one day we’ll be reading about how you survived your first ten years.

Here’s to a bright future!

New Site For Filing Old Tax Returns

He's Back. Uncle Sam Wants You!!!!

He’s Back. Uncle Sam Wants You!!!!

Sometimes things happen.  Life get’s in the way.  Your health takes an unexpected turn for the worse.  You have the best intentions of getting out of the financial hole you are in, but the hole just seems to keep getting deeper.  No matter what the reason is, sometimes the tax returns just don’t get filed on time.  And sometimes they don’t get filed for a few years.  But don’t worry, now you have an option to get back on track.  Introducing fileoldtaxreturns.com!

Fileoldtaxretruns.com is our recently developed sister site to helps those who specifically have unfiled tax returns from previous years.  Why create a separate website; especially if the services are provided the same fine professionals who run Wilson Rogers & Company?  Keep reading.

Software availability.  If you have old tax returns to be filed and are the DIY type, you’ll quickly stumble onto something.  Software providers typically STOP offering tax software for a particular year once the IRS has shut down the e-file platform.  Thus, if you want to prepare your return electronically, there are a limited number of online sites you can use or you have to manually fill out the forms once you download them from the IRS website.  But what if you don’t want to prepare the return?

Real people available year round.  It’s no secret that most retail tax offices close up shop once the tax season is over.  If you have a deadline to provide a tax return to someone (e.g. loan officer for that new home you’re trying to purchase), you might find it hard to locate anyone who can prepare it for you, when YOU need it.  Thus, fileoldtaxreturns.com was created as a option so that taxpayers could get these old returns prepared all year round.  Depending on the situation, you may be able to get them done in as little as 24 hours!

Real people available year round!

Real people available year round!

Repository of tax law.  Tax laws are constantly changing.  Even if you don’t want to have someone prepare your return for you, what laws and tax rates were in effect back when your tax return was due?  Not to worry, fileoldtaxreturns.com has a tax help blog that has all of the historical information that you would need to ensure that your return was done right.  While only containing historical tax rate tables at the moment, it will soon be expanded to include tax law summaries for each year as well as specific information on various credits, deductions and other items.

Help with IRS debt.  It’s not uncommon for those who have unfiled returns to also have amounts owed to the IRS.  Sure, you’ve seen all those companies with the late night infomercials telling you how you can settle your debt for pennies on the dollar if you owe more than $10,000 to the IRS.  But can you trust them?  How do you know if they are reputable?  Well, fileoldtaxreturns.com has a dedicated Got IRS Debt page that will not only inform you of your options when it comes to settling your tax debt, but inform you of your rights!

So there you have it.  If you have (or know someone who has) unfiled tax returns, why not pay a visit to the site?  If you need to speak to someone, you can call the site’s dedicated support number at 844-TAXES88 or 844-829-3788.  Plus, when you visit the site, you can sign up and save 30% off current year tax preparation rates.

Until next time…


By |2014-11-30T08:44:22-06:00November 30, 2014|Categories: Tax Talk|Tags: , , , , , , , , , |Comments Off on New Site For Filing Old Tax Returns
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