I am not expert in this specific area, but am providing a few comments.
You did not state whether this penalty was for the deceased final tax return in the year of their death, or whether this was for the estate. There is a difference. You also did not give a $$ amount of the penalty. The following comments apply to the deceased final tax return. They *may* apply to the estate's return, but I am not certain.
It seems to me that you have several options (probably more)
- If the $$ amount of the penalty is small, simply pay the penalty and avoid frustration. Otherwise, consider the following:
- Review the decedent's tax return and forms to ensure that all the forms W-2, and 1099 that you reported contain the decedent's SSN. In other words, ensure that you are not over-reporting the decedent's income or deductions. If you find errors, you will need to amend the return. If there are no errors, continue reading.
- You may be eligible for a penalty waiver, refer to https://www.irs.gov/newsroom/irs-waives-penalty-for-many-whose-tax-withholding-and-estimated-tax-pay... Also, you may request a waiver due to your and the decedent's circumstances, refer to https://www.irs.gov/newsroom/heres-what-taxpayers-should-know-about-penalty-relief
- I suggest contacting the IRS to discuss your letter, your circumstances and to request a waiver. I presume that your letter from the IRS contains a telephone number you can call. If you can not resolve this over the phone, you can visit a local IRS office.
Good Luck.
