Incompetent IRS

This forum doesn’t have a rule against redundancy in thread titles, does it?

Finally today, after much back and forth, including most recently a certified letter with a “notice of intent to levy your property or rights to property”, the IRS concludes we owe no income tax for my MIL’s estate for the tax period ending October 31, 2017.

Should have been a no brainer, since my MIL was still alive on October 31, 2017, so her estate didn’t even exist until November 2017.

They got confused about fiscal years when we properly filed a 2017 form 1041 for a fiscal year beginning in 2017.

The got confused because you did it right? :rofl: Sounds about right :roll_eyes:

Until today, I thought they got confused because we did it right, and that still seems fairly likely. The previous time I was on the phone with them, the person was very adamant (until eventually convinced otherwise) that I should have used the 2018 form F1041, and that I was wrong to use the 2017 form F1041.

Today the person had a different theory, also a variation of gross incompetence. To file an estate income tax return, you need an “employee identification number” (EIN) for the estate (similar to a social security number). He said that because we applied for an EIN during 2017, they were expecting a tax return for 2017, and that’s what must have confused them. Not at all reasonable, unless they assume we were applying for an EIN in Nov 2017 because we needed to file a return for a period that had ended when we applied. Not likely, but nothing is likely,

Your mother’s estate had a fiscal year of 11/1 - 10/31? Even for fiscal years that don’t correspond to calendar years, that’s an unusual choice of fiscal year. I know we talked about her estate on AO, but I didn’t recall that tidbit of info. How did that fiscal year come to be? I’m intrigued!

As I understand it, and the IRS seems to agree (and the state accepted the fiscal year for state purposes), if you want to file a fiscal year return for the estate, the fiscal year starts on the first day of the month of death. I ended up paying a slight penalty, maybe on both, for thinking the fiscal year would be 12 months starting on the date of death, and that 16 day difference caused the first year return to be late. In the federal case, because they originally started the fiscal year on the wrong Nov 1, they originally tried to collect a much larger penalty.

Huh, I’ve always seen it done as a partial year starting on the date of death and ending 12/31 the year they die. Then calendar years thereafter until the estate is closed.

I think if you do that you are just filing on a calendar year basis. There just is nothing to report as the estate’s before the date of death, so partial year and full year would be the same. Naturally if you do that you continue on a calendar year basis.

I don’t remember for sure now. I might have rejected that approach just because by the time I thought about it the late penalty on a return due 12/31/17 would be bigger. I think it was also because the estate’s expenses were mainly in 2018, and the deductions worked better if we could apply them against its income in calendar year 2017. This was not a big estate. Had I known, in time to file a calendar year 2017 return, that the IRS would get confused about the fiscal year, I would have done it.

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This is good information. Not to be callous but my parents are “at that age” that I need to start thinking about these things. I’m not the executor but I’m sure he wouldn’t mind some help/advice.

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