5.5.3. Working Decedent Cases

(1) Purpose: This IRM section provides official policy and procedures to investigate and resolve accounts involving deceased taxpayers that owe taxes.

(2) Audience: The guidance in this IRM is specifically intended for revenue officers, their managers and advisors, although other employees in SB/SE and in other functions may find them useful.

(3) Policy Owner: Director, Collection Policy, SBSE.

(4) Program Owner: Collection Policy, SBSE, Enforcement.

(5) Primary Stakeholders: SB/SE Collection and Chief Counsel.

(6) Program Goals: Provide policy and procedural guidance to IRS collection employees working accounts involving deceased taxpayers.

(1) Remember the following collection guidelines when working an IMF liability that involves a deceased taxpayer.

(2) Remember the following collecting guidelines when working a BMF liability that involves a deceased taxpayer.

(3) If a joint liability is due and there is a surviving spouse, make a collection determination based on the surviving spouse's assets, as well as the assets in the decedent's estate.

(4) The normal 10-year collection statute applies to collection from the non-probate assets of the decedent and the assets of the surviving spouse on joint liabilities. The probate proceeding extends the collection statute for the decedent's liability only and only with respect to the probate assets in control of the court.

(5) Generally, if there is collection potential on a joint balance due from a decedent's estate, a proof of claim may be filed or other fiduciary notice given. However, a TC 520 should not be input (unless there is an imminent CSED) because collection action continues on the surviving spouse.

(6) For collection of taxes assessed after death, you must look to the fiduciary and recipients of the decedent's assets. Give Form 10492, Notice of Federal Taxes Due, and a copy of the NFTL to the party holding the decedent's assets to notify them of outstanding taxes due. Consult with Advisory regarding the possibility of assessing transferee liability against persons receiving property or asserting personal liability against the fiduciary after researching IRM 5.17.13, Insolvencies and Decedents' Estates and IRM 5.17.14, Fraudulent Transfers and Transferee and Other Third Party Liability.

(7) For additional information on individuals who may have access to information regarding deceased individuals, see IRM 11.3.2.4.11, Deceased Individuals.

(1) ACS will secure and document information such as domicile at the date of death and probate court information. Refer to IRM 5.19.1.5.3, Deceased Taxpayers, for specific research conducted by ACS prior to sending an account to the field for collection action.

(2) ACS will make a lien determination on all decedent accounts in accordance with IRM 5.19.4.5, Notice of Federal Tax Lien Determinations and Filing Criteria, lien procedures. Revenue officers working decedent accounts must verify that Notices of Federal Tax Lien (NFTL's) are recorded in the proper filing location.

(3) Per IRM 5.19.1.5.3.1, Deceased Taxpayer - Balance Due Actions, if the taxpayer owned real property secured by a NFTL at the time of death, ACS will update the account to status 26 for assignment to a revenue officer. The revenue officer will determine the need for any required collection action.

(4) If there is an open probate proceeding or assets were distributed prior to outstanding taxes being paid, ACS will forward a referral to the appropriate Advisory unit.

(1) Fact finding required in a decedent case includes research of probate or surrogate records, as well as internal and third party resources. Proper collection action on a decedent case begins once fact finding actions are complete.

(2) Prior to contact with the fiduciary, research all internal resources such as ACS history and IDRS. These sources should provide:

• date of death

• place of death (including county)

• taxpayer's home address (including county) on the date of death

• tax returns that may be due

• whether a probate proceeding was or is open, docket number and contact information of fiduciary

(3) Information Return Program (IRP) can help identify assets owned prior to death and whether those assets have been distributed. IRP should be checked for the year prior to death, the year of death and the year after death.

(4) Research the Automated Lien System (ALS) to determine if a NFTL was recorded. Determine if the NFTL was recorded in the proper filing location, see Exhibit 5.12.7-2, State and Territory Filing Locations . If not, an NFTL should be recorded in the proper filing location where assets are located.

(5) After you have checked internal sources, make a field call to the probate or surrogate's court or research online if records can be viewed and printed, to determine the type of proceeding that has been filed and to secure copies of pertinent documentation such as:

• death certificate

• will

• letters testamentary or other documents identifying the fiduciary and the fiduciary's contact information

• list of assets, such as an inventory and appraisement

• proceedings that outline distribution or litigation of the deceased's assets

• list of heirs and their contact information

• bonds posted by the fiduciary (this may be a levy source)

• accountings that indicate liabilities, especially if taxes are listed as a debt of the estate

• documents related to a business owned by the decedent

(6) Search county courthouse records to:

• obtain copies of deeds that show what real property the taxpayer owned prior to death and how title is currently held in real property

• determine whether assets were transferred after death, after assessment of taxes or after the NFTL was recorded.

(7) Research Accurint to determine if the deceased owned property out of state.

(8) Request input of the TC 540 on the deceased individual's SSN for the year of death if it is not already input.

(9) For guidance on the progression of probate proceedings see IRM 5.5.2, Probate Proceedings.

(1) Once you complete the fact-finding phase, contact the fiduciary and make demand for any tax due or outstanding returns. Follow requirements in IRM 5.1.10.3.2, Effective Initial Contact. Give Form 10492, Notice of Federal Taxes Due, and a copy of the NFTL to the fiduciary. Form 10492 warns the fiduciary of personal liability if lower priority claims are paid ahead of the Service's claim. Advise the fiduciary that penalties and interest continue to accrue until the balance is paid in full.

(2) See IRM 5.5.1.7, Fiduciary Authority, for guidance on how to identify the fiduciary. If there is no executor, fiduciary or administrator appointed, then any person in actual or constructive possession of any property of the decedent may be considered a statutory executor and may be liable to pay taxes or have personal liability. An executor is defined in Treas. Reg. § 20.2203–1.

(3) Collection against assets not controlled by the court is not restricted. Recording a NFTL or other collection action may continue. Make every effort to work with fiduciaries to secure payment or returns prior to enforcement. Consult with Counsel or Advisory before levy or seizure of probate assets, or if you are unsure whether or not assets are under court control.

(4) Ensure that information provided by a fiduciary or beneficiary regarding assets and debts is corroborated by your own investigation.

(5) If the fiduciary does not provide the asset information requested or has not submitted required documents with the probate court, such as an accounting of estate assets, a summons can be issued to the fiduciary. The IRS should not have to request a state court judge to issue an order for the fiduciary to do what he already had a duty to perform -- file an accounting of assets. If the fiduciary chooses to ignore the summons, IRS can seek enforcement in the federal courts instead of waiting for a state court to act.

(1) Determine whether the NFTL was recorded, when it was recorded in relation to the date of death and whether it was recorded in the appropriate filing location that coincides with property owned by the decedent.

(2) If there is an error with the styling of the NFTL or the location in which the NFTL was recorded, take action to either file a new NFTL or amend the recorded NFTL. See IRM 5.12.7.9, NFTL Corrections, for guidance on correcting lien errors.

(3) It is important to determine what property the lien attaches to and the Government's position among other creditors.

(4) If the NFTL is recorded on an assessment made before death, it attaches to assets owned by the taxpayer and follows those assets into the estate or the hands of the transferee. The Service's priority position with respect to those assets, is determined based on the date of the filing of the NFTL before the taxpayer's death. It is important to determine during your research what assets the taxpayer owned before death and how they were titled, when the lien was recorded. Consult with Advisory or Area Counsel concerning levy or seizure of these assets.

(5) If the NFTL is recorded on a post-death assessment, it would not reach any property that passed to heirs automatically at the time of death (non-probate property), but it would reach any probate property in the taxpayer's "estate" at the time of the assessment. Title to the decedent's property passes to the estate or heirs upon death. It is important to determine during your research what assets were in the taxpayer's "estate" when the lien was recorded.

(6) The assessment lien under section 6321 attaches to all of decedent's property and rights and survives on property passing to the estate or passing by operation of law to others. For issues related to property held with rights of survivorship or in a tenancy by the entirety, consult Area Counsel. A NFTL may not be required to initiate levy or seizure. The assessment lien alone is sufficient where competing claimants are not protected under IRC 6323(a).

(7) The federal tax lien remains on property that passes by a beneficiary deed (which is created by state statute). The beneficiary here does not hold property in common ownership with the decedent with rights of survivorship. Before death, the decedent has the right to revoke or change the beneficiary deed and the beneficiary does not have rights to the property before the taxpayer's death. Consult with Area Counsel concerning levy or seizure of these assets.

(8) Probate and non-probate property are described in IRM 5.5.1.5, Probate and Non-Probate Property.

(9) If a decedent account is under Advisory control, Advisory is responsible for filing, amending and re-filing NFTL's as necessary.

(1) Notices of Federal Tax Lien (NFTL's) and notices such as final demand letters or CDP notice, should be styled and sent as indicated in the table below. In this example, John Smith is the decedent, Jane Smith is his surviving spouse, and Robert Drew is the executor, where applicable.

(2) The NFTL must identify the taxpayer, the party against whom the assessment was made. The fiduciary or his address should not be added to the NFTL.

(3) Notices must be mailed to the fiduciary. If no fiduciary is appointed, notices should be mailed to the decedent's last known address. The fiduciary for the decedent has the authority to exercise CDP rights on the behalf of decedent.

(1) Generally, the Service should not levy on property in control of the probate court. Consult local Area Counsel regarding the effect of probate and local law regarding property interests.

(2) Revenue officers can levy on any property subject to the assessment lien or property of the taxpayer's estate.

(3) If the fiduciary has control of estate assets, a levy can be served on the fiduciary. If there is a levy source that has some sort of income due to the estate (e.g., rental or interest income), you may levy that source directly. If the estate generates income that becomes property of the estate, it can be reached by levy.

(4) If a notice of levy will be issued Letter 1058 must be sent to the fiduciary, if the Letter 1058 was not previously issued to the taxpayer.

(1) Seek advice from Advisory or Counsel concerning other federal and state remedies that may be available to force the fiduciary or beneficiaries to pay the decedent's income or business tax debt. These remedies may include transferee actions against beneficiaries who received property before the taxes were paid or actions asserting the personal liability of the fiduciary under 31 U.S.C. Section 3713. See IRM 5.17.13, Insolvencies and Decedents' Estates, or IRM 5.17.14, Fraudulent Transfers and Transferee and Other Third Party Liability, for further guidance.

(2) A fiduciary is a person entrusted with the property of another. It is the responsibility of a legally appointed or designated fiduciary to control, maintain, and distribute that property in a manner defined by law. The general rule is that in a case involving a decedent the fiduciary must pay the federal tax claim before other claims. A fiduciary who fails to pay federal tax claims may be held personally liable under 31 U.S.C. Section 3713.

(3) If you determine during your research that the fiduciary distributed assets of the estate and taxes were not paid:

• determine if and when the fiduciary had knowledge of the balance due or unfiled returns. Documents submitted in probate proceedings or accountings may provide this information.

• determine if a claim or other notification was made for taxes due, either by proof of claim, Form 10492 or recorded NFTL.

• determine who received assets and the value of these assets.

(4) If there is no executor, fiduciary or administrator appointed, then any person in actual or constructive possession of any property of the decedent may be considered a statutory executor and may be liable to pay taxes or have personal liability. An executor is defined in Treasury Reg.20.2203–1.

(5) Suit must be brought against the fiduciary under 31 U.S.C. Section 3713 within the normal 10-year period of limitations for collection plus any extensions of the collection period. A suit referral should be made as early as possible to allow Counsel time to review the case and authorize the Department of Justice (D.O.J.) to file a suit. D.O.J. needs time to prepare and take litigation action.

(6) If you determine during your fact finding research that assets were transferred before death, consult with Advisory regarding possible transferee issues.

(7) The period of limitation under IRC Section 6901(c) for the assessment of the liability for an initial transferee is one year after the assessment period against the transferor ends. For a fiduciary, the statute of limitations is one year after the fiduciary liability arises or the date the period for collection of the tax ends, whichever is the later.

(8) Another collection avenue is a suit to foreclose the federal tax lien. This is particularly advisable if there are unknown heirs that may have an interest in a property the Service is considering for seizure and sale action.

(9) For more information concerning suits, see IRM 5.17.4, Suits by the United States.

(1) Investigation and collection of taxes due continues despite the death of a taxpayer. You may find during the fact finding phase that the taxpayer owned few or no assets, or that liabilities against the assets exceed equity. If research verifies there are no assets, the account may be closed uncollectible without a lien filed. If assets were transferred before death or distributed by the administrator without payment of the outstanding taxes, continue your investigation. The Government is generally entitled to have its claim paid first, see IRM 5.17.13, Insolvencies and Decedents' Estates.

(2) Use Closing code (cc) 08 when reporting a decedent's account currently not collectible.

(3) Closing code 08 is appropriate for IMF joint liabilities only when both taxpayers are deceased and a determination has been made that there is no collection potential from assets owned by either taxpayer at the time of death.

(4) Closing code 08 may be used when the primary taxpayer is deceased and a determination has been made that there is no collection potential from the decedent's individual or business assets or from persons in possession of such assets. Collection may also be pursued from the surviving spouse on joint liabilities. Request a mandatory follow-up for the surviving spouse if appropriate.

(5) Do not use cc 08 when only the secondary taxpayer is deceased. A TC 540 should be input on the secondary taxpayer's SSN for the year of death. Collection may be pursued from the decedent's individual or business assets or from persons in possession of such assets. Collection may also be pursued from the primary taxpayer on joint liabilities. If the primary taxpayer is determined to be uncollectible, the account should be closed using a hardship closing code. A Collection Information Statement must be secured from the primary taxpayer.

(6) Closing code 08 also applies to BMF sole proprietorships and partnerships only if all of the partners are deceased and taxes were due at the time of death.

(7) In situations where the owner of an LLC is identified as the liable taxpayer and is deceased, closing code 08 is appropriate.

(8) When reporting accounts CNC using closing code 08, do not request separate input of TC 540 to delete the master file filing requirements. TC 530 cc 08 generates a TC 540.

(1) Revenue officers should take appropriate collection actions before referring cases to Advisory. Collection action generally can proceed against distributed assets if the assessment was made before distributing, either through administrative procedures or suit to enforce the lien.

(2) If you determine the assets:

• are under the control of the probate or surrogate's court, copy pertinent documents regarding these assets and prepare a referral to Advisory

• were not reported to the court, contact Advisory or Counsel for guidance on how to proceed with collection action against these assets

• have been transferred before payment of the outstanding taxes or assets are involved in litigation, contact Advisory or Counsel for guidance on how to proceed with collection action against these assets.

(3) State laws vary regarding the requirements involving probate proceedings. Some states require a timely proof of claim to be filed with the probate court where other states do not. If you work in a state that requires a proof of claim, contact Advisory and discuss referring the case for the filing of a proof of claim. Ask the advisor about documentation required to forward a referral so the claim can be filed accurately and timely.

(4) Send referrals to Advisory on Form 4488, Proof of Claim Report for Advisory/Insolvency. This form identifies pertinent information and documentation that Advisory generally needs when filing a proof of claim in decedent cases.

(5) Once a referral of a probate case is accepted by Advisory, an advisor will request input of the TC 520, if appropriate. Once the TC 520 posts on IDRS, the ICS case will close unless outstanding return delinquencies are assigned to the revenue officer.

(6) Guidance for TC 520 and closing codes used for CSEDs, suits and litigation are in IRM 5.1.19, Collection Statute Expiration.

(7) Advisory may issue an Other Investigation (OI) for necessary field actions related to a decedent case under their control.

(1) If you uncover indications of fraud during an investigation, follow guidelines in IRM 25.1.2, Recognizing and Developing Fraud.

(2) Possible indicators of fraud might include:

• suspected intentional omission or concealment of assets

• suspected concealment or alterations of records or documents

• deliberate false statements regarding the valuation of property

• deliberate unsupportable claims for debts or expenses

• deliberate falsification of affidavits pertaining to attorney's fees or executor's commissions.

(3) The TC 971 AC 524 is an identity theft indicator used to lock the account of deceased taxpayers. It prevents a deceased taxpayer's TIN (SSN or ITIN) from being used as the primary or secondary TIN on a current or subsequent year federal income tax return. See guidance in IRM 25.23.2.8.4, Locking Decedent Accounts - TC 971 AC 524. TC 540 also prevents a tax return from posting under the decedent’s SSN after the year of death.

(1) Guidance on who may receive the returns and return information of the deceased individual is provided in IRM 11.3.2.4.11, Deceased Individuals.

(2) Generally:

• The administrator, executor, or trustee of an estate or

• Any heir at law, next of kin, beneficiary under the will, or a donee (recipient) of property may receive information of a deceased individual.

(3) The requester must furnish satisfactory evidence that he/she is an administrator, executor, trustee, heir at law, next of kin, beneficiary under the decedent's will, or a donee (recipient) of property. Acceptable documentation includes, but is not limited to: birth and/or death certificates, a will, a trust, letters testamentary, or other court document.

(1) The Service has addressed circumstances when a deceased taxpayer has designated the IRS as a beneficiary in their will. Information on making gifts to the Government are provided by the Bureau of Fiscal Service at https://fiscal.treasury.gov/public/gifts-to-government.html.

(2) Gifts to a specific agency are treated differently than gifts to the United States generally. Agencies must have specific statutory authority to accept a gift, otherwise it may be considered an impermissible augmentation of their appropriations. 

(3)  Treasury has statutory agency gift acceptance authority but has not delegated that down to its bureaus, including the IRS, see Treasury Directive 61-09.

(4) The Assistant Secretary for Management (ASM) or their designee is responsible for reviewing and determining whether to accept an offer of a gift to the IRS, including a bequest. 

(5) General Legal Services (GLS) facilitates the process of requesting that approval.

(6) If the agency is interested in accepting this gift, GLS will need a description of the gift, the circumstances of the offer, and any conditions that the offeror has placed on acceptance. 

(7) GLS will draft a memo for the ASM’s review, then transmit it to Treasury through General Counsel.