What Happens To the Tax Debt If A Person Becomes Deceased?

Death is an inevitable part of our lives and most times unpredictable. The death of loved ones is even more painful and hard to accept.  Sometimes you have to deal with certain cases after their death. If your loved one owed taxes before passing away, the IRS will still demand payment of tax debts.

Death is a sad occurrence and an uncomfortable subject to talk about. However, You may need to understand what happens when someone owing taxes passes away. Tax is a civic duty of every citizen of a country. This means that the IRS will still expect full payment of tax debts owed in principle by the decedent.

In this article, we will find out more about the payment plans put in place for tax debts owed by the deceased.

What Happens if a Deceased Person Owes Taxes?

The IRS has to ensure that every debt owed does not go unpaid. So if a deceased owes taxes, the IRS will contact their next of kin to inform them about the outstanding amounts owed. When someone dies, the debts they leave behind are settled through the sale of the property they leave behind.

The IRS may also choose to confiscate the deceased’s account and clear their tax debts with any money found. Most people often worry about being hassled for the payment of tax debts owed by loved ones. But this is not always the case.

You are not automatically responsible for the tax debts of your loved ones- husband, wife, friend or parent. You only become accountable for such debts if you had a collective loan deal or stood as a guarantor for their loan.

According to the CSED, the IRS can pursue the collection of tax for about 10 years after which any further action becomes invalid. However, the IRS may request for an extension of the deadline to ensure they get the amount owed in principle.

Who Is Responsible for Settling Tax Bills owed by The Deceased?

When an individual is unable to settle their loan or tax payments, the IRS makes a move to contact their guarantor or ‘Administrator of the Estate’ about the loan settlement. In this case, the deceased’s ‘estate’ comes into play.

This estate contains money, investment, insurance, assets and properties of the deceased. If someone dies without settling their tax debts, the IRS will contact their executor or solicitor for details of their properties and assets.

This move is to confirm if there is a will in place that relinquishes the ownership of certain assets to another person. If the estate’s worth covers the amount owed by the deceased, the IRS will look to clear their debt by claiming ownership of the estate. But if the estate isn’t sufficient to settle all the debts, the IRS will work on clearing up the federal income and estate income taxes.

Generally, the deceased’s executor bears the responsibility of negotiating with the IRS on issues regarding the tax debts owed. The executor will require special permission from the court to proceed with any further dealings. This is called a Letter of administration or Probate.

Relatives of the deceased have nothing to worry about regarding the tax debts settlement unless a relative is the estate’s executor. Even in cases where the estate is not sufficient to cover the tax bill, friends or relatives of the deceased have no part to play in the repayment process.

The executor takes full charge and accountability of the payment of tax debts and handling the estate. The executor must look into these details regarding the deceased tax payments before carrying out the following:

  • Distributing assets as an inheritance to heirs and beneficiaries.
  • Settling other debts before federal tax liabilities could leave insufficient worth for repayment.

In some cases, the deceased may have a legal custodian in place who will be responsible for handling outstanding expenses, managing finances and distributing inheritances included in a will(if any). This legal practitioner will be responsible for handling tax affairs and any outstanding debt.

This legal custodian may be a family lawyer or an administrator of the Estate who has access to the full financial details of the deceased. This direct information could facilitate a speedy process and settlement of outstanding tax bills.

How To Settle Tax Debts For A Deceased Person

Losing a loved one can be heartbreaking which makes it hard to deal with other issues attached to such a person. It may be even more difficult to manage their financial matters left behind. However, there are ways to handle cases like tax debts owed by the deceased effectively.

Here are some of the options available for handling the tax debts of the deceased.

Get Professional Assistance

The first thing you need to know is you are never responsible for the payment of outstanding tax bills of a late relative. The burden of settlement and management rests on the administrator of an Estate. However, not everyone has an executor at their disposal.

You will require the help of a financial consultant or professional through the settlement process to deal with this situation. Financial representatives are quite familiar with these cases and will know how to manage these issues effectively. Therefore, it would be best if you considered hiring the services of a legal representative to handle outstanding debts and negotiate with the IRS.

Also if the deceased has a long history of tax avoidance, you will need the help of a legal practitioner to ensure you are not responsible for any unsettled payment.

File Taxes

Without any financial consultation or legal action, the IRS will have no choice but to place a tax lien on the deceased’s estate. This means they now have full rights to lay claim of ownership of such property.

However, filing for taxes prevents the IRS from placing tax liens on the estate and forcing you to settle federal taxes. This way you can settle other expenses such as funeral costs and other financial expenses. If you do not take this action, the IRS will demand settlement of tax bills through the Estate before any other expense. Once you file for taxes, you can have a legal representative take care of matters concerning the tax debts.


Although this may be an uncomfortable topic, you need to know the steps to take when faced with financial matters in this case. With the information in this article, you should be able to effectively handle matters of the deceased without problems. Remember not to hesitate to seek the help of legal representatives to facilitate a smooth process.

Source: https://www.curadebt.com/

Jonathan Rice

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