Dear IRS: What Part of Deceased Didn’t You Understand?

Last year, one of our clients (call him John Smith) passed away.  I had both a Power of Attorney and Tax Information Authorizations on file with the IRS for this taxpayer.  One of the rules about representation is that when a taxpayer dies, the representation also ends.  It is up to the estate/Executor/Administrator to obtain representation after death.  When this is done, the IRS requires a new authorization sent along with IRS Form 56 and a copy of the death certificate.

Mr. Smith was estranged from his spouse (call her Jane Smith), but apparently never changed his will.  When he passed, my representation passed and I was informed by his spouse that she would be using a different tax professional.  I thanked her for notifying me, informed her of the requirements to get the representation through to the IRS, and closed our file on Mr. Smith.  I never had any IRS authorizations from Mrs. Smith.  (The Smiths were Nevada residents, so there were no state tax issues.)

A week or two later we received some IRS notices for Mr. & Mrs. Smith.  I let Mrs. Smith know, and I wrote back to the IRS noting that Mr. Smith passed away (enclosing a newspaper story of his death), and that I did not represent the estate or the heirs.  I also copied the Centralized Authorization File (CAF) unit of the IRS; they are responsible within the IRS for maintaining taxpayer authorizations. I assumed that after a couple of months I wouldn’t receive any additional notices for the Smiths.

I was wrong.

Three months later I received a notice addressed to “John Deceased Smith.”  So the IRS realized Mr. Smith had passed away (presumably by this time the Social Security Administration notified the IRS, along with my letter to the CAF unit), but my representation had still not been cancelled.  I wrote yet another letter to the IRS, and really expected that to be the end of it.

I was wrong.

Yesterday I received another notice for the Smiths; this was addressed to Jane & John Smith (the actual return for the year in question has Mr. Smith as the primary taxpayer).  Yes, the IRS knows that Mr. Smith is deceased (that has to be the reason they switched Mrs. Smith to the primary taxpayer), but continues to believe that I represent the Smiths.  I wrote yet another letter to the IRS letting them know that I do not represent Mr. Smith; that he is deceased; and that I now have no means of contacting Mrs. Smith (the email address, phone number, and mailing address for her are no longer valid).  I returned the notice to the IRS as an enclosure in my letter.

Yes, this is almost certainly a dumb error at the CAF unit.  But it illustrates the current fiasco of how the IRS handles paper: Put simply, they are not handling paper well at all.  Yet many tax returns must be filed on paper.  I’m quoting to my clients eight months for processing a timely filed original paper return and twelve to sixteen months for a paper-filed amended return.  (The IRS is currently quoting 40 weeks for processing an amended return.  That does appear to be reasonable for an electronically filed amended return but not for a paper-filed return.)  In another case I’m dealing with, the IRS lost my client’s paper-filed amended return.  (He has the return receipt that it was signed for at the IRS.)  That client will be resubmitting his amended return by paper (it is not eligible for electronic filing), and if he’s lucky it will be processed before his timely filed 2022 return in 2023.  Unfortunately, that last line is not sarcasm.

What can be done about this?  First, the IRS’s budget does need to be increased.  However, instead of the IRS prioritizing auditors looking at the middle class the priority should be fixing and upgrading the technology.  To the IRS’s credit, these issues are priorities with the agency but the IRS’s budget simply hasn’t allowed much to be done in this area.  Second, the IRS needs to start telling the truth about processing times.  Lying makes the agency look foolish (which they are right now).  Third, the IRS needs to lengthen response times.  In yesterday’s mail there were two other IRS notices, one dated November 15th and one dated November 22nd.  The deadline for responding to the November 15th notice passed before I received it!  There was no insert giving more time to respond.  Will my client get a Notice of Deficiency?  Who knows, but this is ridiculous.  Finally, it appears that the CAF unit needs remedial training in the rules for a deceased taxpayer.  That (in reality) is the least important of the issues–except that it is an illustration of what taxpayers are dealing with in today’s IRS.


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