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How to handle inherited tax debt

On Behalf of | Jun 10, 2024 | Tax |

Losing a loved one is never easy. The emotional burden can be overwhelming, and dealing with their financial affairs might be the last thing on your mind. However, it is crucial to understand that you could be inheriting more than just cherished memories – you might also be inheriting their tax debt.

What is inherited tax debt?

Inherited tax debt refers to the outstanding tax obligations that a deceased person leaves behind. Contrary to popular belief, the deceased’s debts do not always die with them. In some cases, these debts can be passed on to their heirs or beneficiaries.

When can you inherit tax debt?

According to the Internal Revenue Service (IRS), if the deceased’s estate does not have enough assets to cover their tax debt, the IRS can collect the remaining balance from the person who inherited the assets. This typically applies only to community property states, which includes Texas.

The value of seeking legal guidance

Understanding the intricacies of inherited tax debt can be challenging, especially during a time of grief. Seeking legal guidance from an experienced tax debt attorney can provide you with a clear appreciation of your responsibilities and potential liabilities. An attorney can help you understand the tax implications of inheriting assets, negotiate with the IRS on your behalf and protect your rights and interests.

Remember, ignoring inherited tax debt will not make it go away. The IRS has up to 10 years to collect the debt, and interest and penalties can continue to accrue over time. This could make the situation even more challenging to resolve.

Inheriting tax debt can be daunting, but with the right guidance and support, you can handle this issue with confidence and peace of mind. If you find yourself in this situation, it is crucial to seek professional support. Do not let inherited tax debt overshadow the precious memories of your loved one.