Late Filing and Payment of Estate Tax May Cost the Estate a Fortune

A 32 day delay in paying estate taxes may indeed end up quite costly. A good example is Oskar A. Kinkaid, Jr.’s estate. In this case, the estate was granted a six-month extension until February 11, 2002 but paid $419,000 in tax on March 15, 2002 instead. Additionally, the estate did not file a return until December 4, 2002. The IRS assessed $100,295.28 penalty for the late filing and a later reduced $16,715.88 penalty for the late payment.

The estate did not qualify for a “reasonable cause” exception to penalties as set out by the Supreme Court case United States v. Boyle because an accountant’s timing mistake does not constitute reasonable cause. Likewise, the estate was ineligible for the reasonable cause extension under IRC §6161(a)(2)(A) because qualification for such an extension is left to the discretion of the IRS, and the estate never asked for an additional extension.

See Robert L. Moshman, Better Late Than Never?, Est. Analyst (Oct. 2007).