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The Internal Revenue Service (IRS) is the federal tax collection agency and is authorized to take measures such as seizing assets, even when they are linked to an inheritance, when there are outstanding tax obligations.
Although it is a possible action, it is not an automatic procedure, and the agency must follow a series of steps before issuing this order. This measure may vary depending on who owes the tax debt and the state in which the probate process is at.
In this regard, both the deceased’s outstanding taxes and those of the heir may enable the agency to act on the inherited assets.
IRS blocks bank accounts and seizes the assets of these people: In what situations can the Government intervene in an inheritance?
The tax agency may order the seizure of an inheritance when there are outstanding tax debts of the deceased or of the person who inherits. However, there is one step that must not be forgotten to avoid this type of sanction.
When a person dies, their assets become part of the estate, and that estate must settle taxes before being distributed.
If there are unpaid amounts, the IRS can:
- Claim payment from the estate.
- Require the legal representative to regularize the situation.
- Place liens on the estate’s assets.
The importance of the Final Tax Return: Who must file it?
The key step is to file the deceased person’s final tax return. This procedure is mandatory and must include:
- All income up to the date of death.
- Prior-year returns, if any, were missing.
- Payment of any outstanding debt or request for a refund.
The responsibility falls on the surviving spouse or the estate’s representative. Additionally, if the estate’s assets generate income such as rent, investments, and other income, it may also be necessary to file an additional estate return through Form 1041.