What to do about Estimated tax penalty for deceased person?

[nanarose28]

I completed my deceased Mother's taxes using Turbo Tax. The taxes were accepted and the balance owed was withdrawn from my account.  I just received a letter from the IRS that I owe additional money for "failure to pay proper estimated tax penalty". 1) Should this have been noted by Turbo Tax while completing her return?  2) If I call the IRS (as noted on letter) would penalty be removed since she died in April 2018 and taxes were only withheld from her Social Security and pension for 3 months last year?   Any recourse? 

[bosso3]

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.

[nanarose28]

Thank you for the detailed answer especially those helpful links.  The penalty was for my Mother's personal taxes not the estate and although only a few hundred dollars I am going to call and try to appeal the penalty.

[ron6612]

Is it ok to make estimated tax payment for 4th quarter for deceased person to try to reduce taxes that would be do based on income made while the person was still alive?

[ron6612]

The reason for the question was to try to pay all taxes due with the final 1040 instead of having taxes due based on the estimates already made.

[NCperson]

the sooner you pay the estimate, the lower the penalty will be....you don't have to wait until the January 15th deadline to make the payment. 

[ron6612]

From a tax search article:

Stop making estimated tax payments

Once a taxpayer dies, he or she is no longer required to make estimated tax payments. Many well-meaning family members continue to submit the decedent’s quarterly estimated tax vouchers, which is not necessary and may require taking funds out of an investment portfolio, where they could otherwise be growing and earning income for as long as a year.

Not only does Regs. Sec. 1.6654-2(e)(7) indicate no joint estimated tax payments can be made after death and the estate has no liability to make further payments, it makes practical sense that no payments are needed, too. The decedent’s tax year ends on the date of death, so only income received through that date is reportable on the final Form 1040. If the deceased taxpayer was paying an amount each quarter to cover the expected tax liability for that quarter, he or she would no longer need to make those payments after the tax year ends. (Note, however, that the surviving spouse may need to make estimated payments for his or her own tax liability.)

Even if the deceased taxpayer was taking advantage of the prior-year-tax safe harbor in making estimated tax payments and the Form 1040 ends up with a balance due later on, the tax preparer can eliminate filing the Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts.

Who

[ron6612]

I just tried to make an estimated tax payment through IRS direct pay for my deceased mother using her prior year tax return information and an error message came back "could not verify the information."  Is this because the IRS knows she passed away and can't make an estimated tax payment anymore?

[Irene2805]

Yes.  The Social Security Administration notifies the IRS when a person has died.

Your best course is to respond to the letter sent to you by the IRS, to the address provided in the letter.  Explain your situation and ask that the penalty be waived.

 Yes,