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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 7098
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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I was POA sister who passed away on 10/31/15. She has been

Customer Question

I was POA for my sister who passed away on 10/31/15. She has been living in a nursing home for the past three years. She cashed in an IRA to pay for prearrangements for her burial, but, chose not to have taxes taken out on the proceeds of the IRA, consequently she owes back taxes, both state and federal that she cannot pay. There are no assets, with the exception of a VERY small balance in her checking account. What am I to do?
Submitted: 1 year ago.
Category: Tax
Expert:  Stephen G. replied 1 year ago.

Well, you would prepare her final personal income tax returns for 2015 and if there are any taxes due in excess of what you are able to pay from her funds, you simply attach a statement to her final return indicating that she has no assets and is unable to pay the balance due on her taxes.

Are you sure that she will owe income taxed after considering medical expenses (nursing home costs?), personal exception, etc.?

Customer: replied 1 year ago.
Well, she was on SSA and Medicaid and no taxes have been filed since 2012, the year that she withdrew the IRA. Her yearly income from SSA was approximately $15,200 and THAT went to her monthly nursing home cost.
Expert:  Stephen G. replied 1 year ago.

So you are talking about a tax return for 2012?

How much did she withdraw from the IRA?

Have you heard from the IRS about the missing 2012 return?

Customer: replied 1 year ago.
We did file a claim for 2012 reflecting the IRA income, but, she chose NOT to have taxes taken out at that time. I have had various communications with the Indiana State and Federal regarding her inability to pay. Both put her account on a "hold" and marked it "unable to pay". There are no assets, no real estate, no vehicle, no life insurance, nothing, other than a small balance in her checking account, about $1.,200.
Customer: replied 1 year ago.
The approximate amount of her IRA was $23,000 and all of that was justified via a letter to Indiana State and to the IRS.
Expert:  Stephen G. replied 1 year ago.

Well, if I were you I'd just write a letter to the IRS and Indiana Department of Revenue informing them of her death & that there are no funds available to settle her tax bills.

Did you ever file a tax return for 2012?

I ask because between her personal exemption & Nursing Home Expenses for whatever went to the Nursing Home from her Social Security, I doubt that she would owe very much in income taxes.

What was done with the $23,000.?

Expert:  Stephen G. replied 1 year ago.

In fact, her total taxes may be less than the $1,200.