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Messy Decedent's Tax Returns

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Level 2

Any one has dealt with a decedent's tax return filing that the decedent has not filed taxes for many years, in fact, no one can locate the last tax return of the decedent?  I plan to request e-Transcript of 1099-MISC (the decedent was self-employed in catering industry her whole life), and start from there.  

Any other suggestions? 

 

 

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Highlighted
Level 13

"Any other suggestions?"

Has anyone asked the IRS for 1040 transcripts? The 1099-Misc transcript will be "interesting" but not comprehensive.

I had to do this for my father, a Lacerte preparer that hadn't done his own return for 2 years, but kept doing client's returns. I had to pay three banks to get historic statements of his accounts and he had 13 credit cards in use, so I gathered paperwork for months. Fortunately, as a pretty good computer user, he had one file with a listing of access and passwords for accounts and financial institutions that pointed us to where he had holdings. Also, over the course of 6 months or so, you get their mail, which reveals a lot. If nothing else, they typically stash paperwork somewhere.

I did this for my grandmother, as well, and it went very differently. She got ill in Aug and died the next Jan. From that Aug on, I kept asking if I should help with that prior year's tax return, which had been put on extension by her CPA, as well as help get ready for the current year. She didn't want me to get involved. So, when she died in the year she died, there was no activity for reporting on taxes and I wasn't responsible for the fact that the year before was never filed. I later got a letter from the IRS, as did one of my friends whose mother also died that year. The woman died owning no real property, no retirement, hardly any funds in checking, and the IRS letter told us she owed them over $275,000. I responded with the detail info for the year of death and that no one alive is responsible for her not filing that prior year.

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"Level Up" is a gaming function, not a real life function.

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3 Replies 3
Highlighted
Level 13

"Any other suggestions?"

Has anyone asked the IRS for 1040 transcripts? The 1099-Misc transcript will be "interesting" but not comprehensive.

I had to do this for my father, a Lacerte preparer that hadn't done his own return for 2 years, but kept doing client's returns. I had to pay three banks to get historic statements of his accounts and he had 13 credit cards in use, so I gathered paperwork for months. Fortunately, as a pretty good computer user, he had one file with a listing of access and passwords for accounts and financial institutions that pointed us to where he had holdings. Also, over the course of 6 months or so, you get their mail, which reveals a lot. If nothing else, they typically stash paperwork somewhere.

I did this for my grandmother, as well, and it went very differently. She got ill in Aug and died the next Jan. From that Aug on, I kept asking if I should help with that prior year's tax return, which had been put on extension by her CPA, as well as help get ready for the current year. She didn't want me to get involved. So, when she died in the year she died, there was no activity for reporting on taxes and I wasn't responsible for the fact that the year before was never filed. I later got a letter from the IRS, as did one of my friends whose mother also died that year. The woman died owning no real property, no retirement, hardly any funds in checking, and the IRS letter told us she owed them over $275,000. I responded with the detail info for the year of death and that no one alive is responsible for her not filing that prior year.

*******************************
"Level Up" is a gaming function, not a real life function.

View solution in original post

Highlighted
Level 15

1. Get  a retainer up front

2. Get bank statements, check register, credit card statements so you can reconstruct income and expenses.

3. Ask state for copies of sales tax reports, if applicable

4. Get more money as the retainer is used up.


ex-AllStar
Highlighted
Level 11

How many customers are required to issue a 1099 to caterers?  Like, it's not on the list of services offered by wedding planners.  You are spinning your wheels with a transcript request -- especially since it may take forever now that IRS has just started accepting them again. 

Follow the suggestions of @qbteachmt and @sjrcpa , and familiarize yourself with what an IRS auditor would do if the decedent were still alive and an unhappy customer (perhaps with food poisoning) turned her in.  How much of the income was paid by check, and how much in cash?  Even bank deposits might not yield a good picture of gross receipts, and of course expenses may show grocery shopping that was strictly personal.  

I would probably do a "lifestyle" audit and figure out how much she had to net to support the house where she lived, the car she drove, and her other personal expenses.  Her survivors should be able to give you more useful information, than her bank.