IRS explains who may sign returns and assessment agreements for deceased taxpayers

Plain-English summary

Chief Counsel Advice addressed who may sign unfiled returns, Form 870, and Form 872 after a taxpayer's death. A person holding the decedent's property may sign unfiled returns, although the Service may require Form 1310 or proof of authority before paying or crediting a claimed overpayment. For a Form 870 or Form 872, the Service should require proof that a court appointed the signer as the estate's personal representative, such as letters of administration or letters testamentary. The advice also concluded that an attorney-in-fact's extension signed in good faith before learning of the principal's death remains valid, but the power of attorney ends once the attorney-in-fact learns of the death.

Ruling snapshot

• Question: Who may sign returns, Form 870, and Form 872 for a deceased taxpayer?
• Outcome: Advice given, court-confirmed authority is generally required for Form 870 or Form 872.
• Key authorities: IRC §§ 6012(b)(1), 6501(c)(4)(A), and 6213(d); Treas. Reg. § 301.6903-1(b)(2); Fla. Stat. § 709.2109(4); N.J. Stat. § 46:2B-8.5(a).

Full text (IRS public release)

ID: CCA_2013061910280146
Office: --------------
UILC: 6501.08-08, 6501.08-21, 6213.02-
02, 6213.03-05, 6213.08-00
Number: 201334040
Release Date: 8/23/2013
From: --------------------
Sent: Wednesday, June 19, 2013 10:28:07
To: ----------------------
Cc: ---------------------------------------------------------------------
Subject: Who may sign returns and Form 870 or 872 for deceased taxpayers

Hi,

You posed three scenarios and asked in each about who can sign unfiled tax returns
and sign Forms 870 and 872 after the death of the taxpayer.

Case A:

Q. Decedent is a non-filer who died intestate with one asset: a bank account held by
the decedent, her daughter, and her daughter’s husband. Field counsel considers the
daughter a distributee and proposed having the daughter to sign a Form 56, Notice
Concerning Fiduciary Relationship, and then sign the decedent’s unfiled tax returns and
Form 870 or 872.

A. The daughter may sign the decedent’s unfiled returns, because section 6012(b)(1)
provides that “Tax returns of decedents are to be made by the decedent’s executor,
administrator, or other person charged with the property of the decedent.” The daughter
has the decedent’s property. If the daughter submits balance due returns, those are
acceptable without proof of authority; but if she claims credit elects or refunds, the
Service may demand Form 1310 and/or documentary authority before refunding or
crediting any claimed overpayment. See IRM 3.11.3.10.2(3). The Service may
communicate with the daughter and her representatives about returns the daughter
signs for her mother.

Section 6501(c)(4)(A) provides for extending the ASED and section 6213(d) provides for
waiving restrictions on assessment, but who may sign ASED extension consents and
waivers for decedents is not specified in the statutes or regulations. Although Revenue
Ruling 83-41, 1983-1 C.B.349, clarified, amplified by Rev. Rul. 84-165, 1984-2 C.B.
305, held that “the Service will generally apply the rules applicable to execution of the
original returns to consents to the extension of time to make an assessment”, it ruled
that in the absence of a court-appointed administrator for an intestate decedent, nobody
may sign an ASED extension for the intestate decedent. Under the revenue rulings, the
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daughter may sign ASED extensions for her liability as a transferee, because it’s her
own liability, but she may not sign Form 870 or 872 for her mother’s estate without
being appointed as the personal representative (administrator) for her mother’s estate
by a court of competent jurisdiction. The same rules should apply to Form 870, as well.
The Service should require letters of administration or equivalent proof of such
appointment before accepting an 870 or 872 from the daughter.

The daughter should also submit a Form 56 to document her fiduciary relationship as
the personal representative of her mother’s estate. The regulations require the fiduciary
to retain proof of authority to act for the principal, sec. 301.6903-1(b)(2), and the same
authority that would provide a foundation for Form 56 would likely suffice for Forms 870
and 872 (that is, letters of administration from a state probate court).

Case B:

Q: Decedent established a revocable trust into which he transferred all his assets
before he died. He died testate, naming B his executor. B is also one of three trustees
of the trust. The will has not been probated, and nothing passed under the will. Field
counsel proposes treating the trustees as “testamentary trustees” and having them sign
Form 56 and Form 870 or 872. The trust documents require the trustees to act
unanimously, and the trustees have voted to appoint B the person to handle IRS
matters.

A: B may execute any unfiled returns for the decedent, because section 6012(b)(1)
provides that “Tax returns of decedents are to be made by the decedent’s executor,
administrator, or other person charged with the property of the decedent.” The Service
will accept returns signed by B as trustee in possession of the decedent’s property, but
the Service may require a Form 1310 and/or documentation of B’s appointment by a
court if the returns claim an overpayment.

As for filing a Form 870 or 872, the Service should require proof of authority, confirmed
by a court (that is, letters testamentary), before accepting either an ASED extension or
a waiver of restrictions on assessment.

Case C:

Q: The day after decedent died (in New Jersey) and before his attorney-in-fact learned
the decedent (principal) had died, the POA (acting in Florida) executed a Form 872
extending the ASED. No probate has been opened, and no representative has been
appointed.

A: The ASED extension signed by the attorney-in-fact the day after the taxpayer’s
death and at a time when neither the attorney-in-fact nor the IRS knew that the taxpayer
had died is valid, because under both Florida law (where the attorney-in-fact acted) and
New Jersey law (where the taxpayer died and may have been domiciled) acts by an
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attorney-in-fact done in good faith and without knowledge that the principal is dead are
valid and binding. Fla. Stat. § 709.2109(4); N.J. Stat. § 46:2B-8.5(a).

Now that the attorney-in-fact is aware of the principal’s death, the POA is terminated,
and he is not authorized to act for the decedent. If the estate wishes to submit a Form
870 or 872, the Service should require proof of authority to bind the estate. If the
decedent died intestate, then court appointment of an administrator (and letters of
administration) will be required. If the decedent died testate and named an
administrator, then court approval (and letters testamentary) will be required.

Conclusion: In all cases, if the purported personal representative won’t provide proof of
authority (letters of administration or letters testamentary from an appropriate court),
then no 870 or 872 should be accepted, and notices of deficiency should issue to
ensure that the assessments are valid (copies to the taxpayer’s last known address and
to the address of any fiduciaries, whether confirmed or not).

Please let us know if you have any further questions.

Best,