Case Study: Unprocessed Amended Return

Two years and a Tax Court case required to address a simple issue

My client’s relative died in late 2019; she got a payout from the estate in 2020 and asked the attorney if she would be receiving any tax documents related to this payout and was told no. Based on this advice, we filed her 2020 Form 1040 in early 2021.

Fast forward to October 2021, and my client receives a Schedule K-1 from the estate reporting a $83,431 long-term capital gain to my client. I prepared and filed an amended 2020 Form 1040 showing an additional $12,865 in tax due to (1) the increase in long-term capital gain income and (2) the decrease in her 2020 recovery rebate credit due to the adjusted gross income increase.

On December 1, 2021, my client paid $12,865 to the IRS, which should have closed this issue except for some interest accrual once the IRS assessed the tax.

This situation was not fully resolved until November 13, 2023, over two years later. If you are a paid subscriber, read below for the history with actual documents.