Parents Die

Today TaxMama hears from Sara in Kirkland, WA who asks, “My parents have a debt to the IRS for back income taxes. They have tried an Offer in Compromise twice and been rejected. The incident is now about 20 years old, and they have given up hope of ever paying it off. I think they owe between $30,000 and $50,000.

I have heard rumors that we adult children may be liable for this debt when my parents both die (if we survive them, of course). Is this true? Should I be saving up for this?

They won’t have any assets to speak of at their death, at the rate they are going anyway.
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Dear Sara,

If the tax is really that old, it’s possible they don’t owe it anymore.

Have them call IRS and ask “When does the statute of limitations expire on my tax debt for [years]?”

If they still owe the money at they time of their death, none of you will be personally liable, so don’t worry.

However, their estate will be. So, if they own a home, or have any assets, the money from those must go towards paying their tax debt.

ONLY if you and your siblings keep the money without paying the taxes will you become personally liable. IRS can follow the money to whoever received it – and collect from them.

But, as you say, if there are no assets, forget it.

Though, do make your parents feel better and check up on the statute.

Once a tax debt is posted, IRS only has 10 years to collect it PLUS the period of time the offers
in compromise or appeals were filed.

If I’m right, your parents are going to feel much better when they find out they’re off the hook.
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