Trying to file taxes, and TT says I need to pay penalties and interest for failure to file estimated taxes quarterly. Mother died in November, I was beneficiary of IRA from which she had not taken RMD, and inherited mineral rights which were then sold. Is there a form to negate the penalties and interest? I couldn't prepay estimated taxes on things I didn't know were going to happen....I understand the taxes, but surely I shouldn't be penalized for not filing estimated taxes.
First, fill out FORM 2210ai
Normally, the tax penalty presumes even income over the course of the year but FORM 2210ai figures the penalty for “lumpy income” and it could be that completing the form eliminates the penalty as you will report the RMD in the last part of the year
Also, if you sold the mineral rights after you inherited it , why is there tax to be paid ? Wouldn’t the value of the mineral rights “step up” at the passing of your mother?
@Pembroke37 NCpeson is correct about the sale of the mineral rights. NORMALLY, there is a stepped-up basis as of the date of death (let's say $1,000). If the rights are subsequently sold then any profit or loss on the sale will be based on the stepped-up basis, not the basis prior to the date of death. NOTE that this is the case for securities (stocks, bonds, mutuals, real estate, etc.) but I am not well versed on mineral rights so you should not take this as anything but advice to find this out for yourself. Download IRS publications, 551 and 559 for a start.
You can also request a waiver of the penalty by checking box A in part II of form 2210. You will need to attach an explanation as to why you are requesting the waiver. It also wouldn't hurt to attach a copy of your mother's death certificate and document when you received the unexpected income. The IRS might be more sympathetic if it was very late in December.
You can also ask for first time penalty abatement. Call the number on your notice.
You may qualify for administrative relief from penalties for failing to file a tax return, pay on time, and/or to deposit taxes when due under the Service's First Time Penalty Abatement policy if the following are true:
Penalty Relief Due to First Time Penalty Abatement or Other Administrative Waiver