Letter from the IRS - Regarding Tax Filings for Deceased Parents [View all]

[MineralMan]

This has to do with the IRS, so it's government related.

When a parent or parents die, you may have to file a tax return for them, as a surviving offspring. I had to do that. My parents both died in January of 2021. I had to file their 2020 income 1040 tax form for the previous year. Their financial records and other paperwork were in terrible disarray, and I couldn't even go to California after they died, due to COVID.

So, in April of 2021, I filed for an automatic extension on filing. My relatives in California had boxed up all of the paperwork they could find in their house, including the contents of a three drawer filing cabinet. I had their incoming mail after their deaths forwarded to my address.

I went through everything. They had stopped using their accountant for their farming income that year and my father, due to some mild Alzheimer's, had not paid some bills, and had not kept some mail he should have kept. So, I had very poor records to use for the filing. I did have his 2019 1040, however, that had been filed by their accountant. But, they stopped dealing with that accountant in 2020. They owned no California state income taxes in 2019, so I did not file with CA for 2020 at all.

In October, I knew I had to file for them. I did my best to piece together the farm income and expenses. I had settled all of their outstanding bills, cancelled everything, and contacted everyone I could to ask for an annual statement for 2020. Some complied. Others did not. They also had huge medical bills for home care, etc. I got account records from their providers.

Anyhow, I used TurboTax to prepare their return, using estimates where necessary and checking everything against their 2019 1040. Nothing much had changed in 2020, anyhow, but the 2019 filing helped me create acceptable estimates when I didn't have actual documentation for numbers. There is a place on the 1040 where you can tell the IRS that a taxpayer has died, as well, along with the dates of death.

For reference, here is another step I took: I wrote a cover letter to attach to the 1040 filing for 2020. In it, I explained the disarray I found in their documentation, described their illnesses, and stated that I had estimated some numbers for lack of information. I stated, "To the best of my knowledge, this filing is as accurate as I am able to make it."

I was careful to make sure that the amount I paid for their 2020 taxes was just a bit larger than the payment for the 2019 tax year. I assumed that the 2020 filing would be compared to previous filings by the IRS. I signed the 1040 as the Preparer, with a note identifying myself as the son of the deceased taxpayers.

Then I wrote a check, put it and the completed filing in the mail and waited.

I was somewhat worried, but I was not contacted by the IRS until yesterday. I opened that letter from the IRS with some anxiety. What I found was a bill for a penalty of about $40 for failing to pay one estimated tax payment for their 2020 tax year. That was it. I put a check in the mail today.

If you find yourself in a similar situation, and I know that some DUers will, don't panic. Do the best you can with filing your deceased parents taxes. If possible, compare what you file with a previous year's return. Add a cover letter, explaining the situation fully, and pay a little more than they paid the previous year, if they had to pay. Then, don't worry too much. The IRS understands that people die with their paperwork in disarray. The IRS WILL compare what you file to previous years. If you pay something similar, the IRS will just say OK, never mind, and you'll be done. If you get a bill for some penalty or other, just pay that bill at once. After you do that, the ordeal will be over.

A Caution: If your deceased parent(s) were high-income people, or their estate is large enough to trigger federal or state estate taxes, go to a tax accountant. However, if not, you can do it yourself, for sure. Frankly, though, if you pay a little more than they paid the previous year, you won't get hassled by the IRS in normal circumstances.