An estate in North Carolina may owe back taxes if the deceased did not pay all of their taxes before they died. If this is the case, the estate will need to work with an attorney to resolve the issue.
A North Carolina estate planning attorney can help the estate file the taxes or may help negotiate with the IRS if the estate cannot afford to pay the back taxes. If the estate is unable to pay or is unable to pay it all at once, the attorney may be able to negotiate a reduction in the amount that is owed. In some cases, the attorney may be able to have the back taxes forgiven.
Most often, what you may expect to get is a payment plan or a settlement plan from the IRS.
Can an Estate Be Shared Among the Heirs if There Are Back Taxes Owed?
If an estate owes back taxes, the heirs cannot share in the estate until the taxes are paid. The executor or administrator of the estate is required to pay the taxes, plus interest and penalties. If there are assets in the estate that can be used to repay the taxes, the executor or administrator may sell them to pay these outstanding taxes.
The estate may also have to pay additional fines if it doesn't pay the back taxes within a certain period of time. As such, it is best to work with a skilled tax and estate attorney who will help you to apply for the best possible payment and/or waiver plan with the IRS.
What Are the Consequences of Owing Back Taxes in North Carolina?
If an individual or business owes back taxes in North Carolina, the consequences can be significant. The state may seize assets to cover the amount owed, and the taxpayer may face penalties and interest charges on the overdue taxes. In some cases, the state may even pursue criminal charges.
Can You Simply Try To Avoid Paying Back Taxes on an Estate in North Carolina?
In general, you cannot simply try to avoid paying back taxes on an estate in North Carolina. However, there may be specific circumstances in which you may be able to get some relief. For example, if the estate is insolvent or if the taxes are the result of a mistake on the part of the government, you may be able to negotiate to pay a lower rate for the accumulated back taxes.
Also, if the back taxes were owed after the testator had gotten a bankruptcy filing and proceeding, you do not have to pay the taxes all the way back to a 10-year period. Ten years is the statute of limitations of tax collection after assessment of tax liability.
So, if the testator has had a bankruptcy application approved but still owes back taxes, the estate will simply have to pay back taxes for the last three years. This is a waiver often given to individuals who have filed for bankruptcy.
What Measures Can the IRS Take if the Estate Refuses To Pay the Back Taxes?
In North Carolina, the Internal Revenue Service (IRS) may take a number of measures if the estate refuses to pay the back taxes, including foreclosing on any property. The IRS may file a Notice of Federal Tax Lien to secure its interest in the property of the estate, or it may seek to have the property seized and sold at auction. The IRS may also seek to have the executor or other responsible party held liable for the back taxes.
What Can You Do if Your Estate Owes Back Taxes in North Carolina?
The consequences of owing back taxes in North Carolina can be severe. You may face penalties, interest, and even imprisonment. You can also lose your property. As such, if your estate owes back taxes in North Carolina, you should seek legal assistance from an attorney.
David Anderson and our estate planning team can help you negotiate a payment plan with the state or may be able to get the debt forgiven. Additionally, your attorney can help you protect your estate from future tax penalties.
We can help with exploring all available options and protecting your financial future, including providing guidance on a wide range of topics related to estate and gift taxation, income taxation, retirement planning, and more.
Figuring out how to settle back taxes can be confusing and overwhelming, but it is important to get to work resolving these issues as soon as possible. Contact us today to get started.