Estate Tax Filing Error Costs Executor

Merely delegating the filing of an estate tax return is not enough to exempt an estate from late-filing and late-payment fees.

The U.S. Court of Federal Claims ruled that plaintiff David Andrews, as executor and trustee of his father’s estate, had a “nondelegable” duty to meet tax-related obligations. Andrews sought a refund for late-filing and late-payment fees plus interest that he had to pay due to his attorney’s computer calendar error. The computer did not generate the correct date for Form 4768, an application for a filing extension on the estate tax return.

According to the brief, an estate tax return, “if required to be filed, is due within nine months of the death of a decedent and must be filed on IRS Form 706.” In the case of a late filing, “the IRS imposes a penalty of five percent of the tax amount owed if the failure to file exceeds one month, with an additional five percent added for any additional month.” Andrews wanted to file for an extension on the estate tax return but claimed that his attorney’s computer was at fault. Once his attorney realized “a computer calendaring error failed to generate the correct date for the form,” she filed the Form 706 three months after it was due.

Since the untimely filing was not due to “erroneous advice” from the attorney, and Andrews delegated the filing of the form to his attorney, the government dismissed his claim, stating that “one does not have to be a tax expert to know that tax returns have fixed filing dates and that taxes must be paid when they are due.”

In the motion, it is explained that “The critical error occurred when Attorney missed the deadline to file the Form 4768 … That was a failure of action, not of advice, and one that could not have happened without Plaintiff’s delegation to Attorney of his duty to apply for extension.” Simply having an attorney take care of the filing was not enough for the government to return the fees Andrews paid on the estate tax return.

Source: Andrews v. U.S. (May 2021).