Anyway, here is the story. What would YOU do?
Taxpayer owes IRS about $10,000. Hasn't had two nickels to rub together since the tax assessment, and every year the IRS sends her a form, she lists her income and assets, which is: "diddly", and sends it back to the IRS.
This has been going on for 9 years.
So now her mom dies, and leaves her $15,000. She tells me that she has the annual form the IRS sends her, and she's afraid to fill it out. She considers that in another year the IRS will drop her from the collection rolls.
She asks me what she should do. Would you tell her to pay or sit tight? =================== Just because she will inherit $15k doesn't mean that it's her property yet. Is there probate or an estate to be administered by will? If in the course of normal administration, she doesn't come into the money before the collection SOL expires, the question is moot.
If she already received the $15k, you may tell her that she's screwed. She should have talked to you first. Full payment will occur.
If she hasn't received the inheritance yet, she should fill out the form based on what she has NOW and turn that in. That will likely "53" the account again. This is not a lie because she has no right to the money until the estate distributes it (or makes it available for distribution).
The only gray area is if the money is currently available for distribution but she hasn't received it yet due to an action on HER part (e.g. not having deposited a check in hand).
I advise that the period of adminstration for an estate is never shorter than the period from death to the due date of form 706, even when it is not required (e.g. under the filing threshold). It may be longer.