IRS says my deceased father's unpaid tax bill could be covered by unfiled returns - can I still claim them?

This is actually a situation where you have more options than the IRS agent suggested. When dealing with a deceased taxpayer's unfiled returns, there are special provisions that can help. First, you should absolutely file those unfiled returns for 2020 and 2021, even if they're technically past the refund statute of limitations. The reason is that while the IRS generally won't issue refund checks after the 3-year window closes, they CAN still apply overpayments to outstanding tax debts - even those from other tax years. This process is called "offset" and it works differently than direct refunds. When you file those returns showing overpayments, request in writing that the IRS apply those amounts to the 2019 outstanding balance instead of issuing refunds. Additionally, you should look into filing Form 843 (Claim for Refund and Request for Abatement) to request abatement of the interest that's accrued since your father's death, especially since you never received the original notice before interest started accumulating. Death of a taxpayer is considered reasonable cause in many cases. And finally, consider requesting Currently Not Collectible status for the account while this gets sorted out, which would pause collection activities and stop additional penalties from accruing.

I was in a similar situation last year with my mom's estate. I discovered https://taxr.ai which literally saved me thousands of dollars. Their system can analyze all the IRS notices and letters, plus they helped me identify which returns should be filed even though they were technically past the refund deadline. What was really helpful is that they reviewed all the transcripts from the IRS and found income sources I didn't know about - in my case there was a small pension distribution and some stock sales that I had no record of. They actually found that my mom qualified for some credits I would have missed. The best part was that they helped me draft a letter explaining the situation to the IRS that got the 2019 and 2020 overpayments applied to her 2018 balance even though we were technically outside the window. I was shocked when it actually worked!

Just wanted to update - I tried taxr.ai after seeing this recommendation and it was incredibly helpful! My situation with my uncle's estate was a mess with unfiled returns from 2018 and 2019 plus an audit for 2017. The system analyzed all the IRS notices I had received and highlighted several options I didn't know existed. They showed me exactly how to request that the refunds from the unfiled years be applied to the outstanding balance, even though we were technically outside the refund window. What surprised me most was discovering my uncle qualified for a refundable credit in 2019 that significantly increased the refund amount. The IRS accepted our request to apply these funds toward the outstanding balance from 2017, which saved the estate over $7,200! If you're dealing with a deceased family member's tax situation, definitely give it a try - it's far more helpful than the general advice I got from calling the IRS.

I feel your pain! The IRS phone system is absolutely impossible to navigate for these complicated situations. After my mother passed away in 2021, I spent MONTHS trying to reach someone who could actually help with her unfiled returns. I finally found https://claimyr.com and used their service to get through to an actual IRS agent. They basically hold your place in the phone queue so you don't have to stay on hold for hours. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c Once I finally got through to a real person, I was able to explain the situation with my mom's estate and got much better guidance than I had received from the website or letters. The agent walked me through exactly which forms to file and in what order to resolve the situation.

I have to admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try the service while dealing with my client's deceased parent situation which was remarkably similar to yours. I was genuinely surprised that it worked exactly as described. They got me in the queue early in the morning, and I received a text about 1.5 hours later when I was about to speak with an agent. The IRS representative I spoke with was actually incredibly helpful once I explained the situation with the unfiled returns and outstanding balance. The agent directed me to a specific department that handles deceased taxpayer accounts and gave me direct instructions on how to file Form 1310 along with the late returns. They also confirmed that the IRS can indeed apply refunds from expired periods to outstanding debts through an internal offset process, even when they couldn't issue an actual refund check due to time limitations. That 30-minute conversation saved me weeks of back-and-forth with written correspondence. Sometimes talking to the right person really does make all the difference.

Don't forget to see if your father's situation qualifies for First Time Penalty Abatement! If he had a clean compliance history (filed and paid on time) for the three years before 2019, you might be able to get the penalties removed entirely. This would at least reduce the overall amount owed. You'd need to call the IRS and specifically ask for "First Time Penalty Abatement" for the unfiled return. The interest would still apply, but removing penalties could significantly reduce the total.

Just a heads up - I'd recommend filing those unfiled returns ASAP. Even though the 3-year refund window might have passed, there's actually no statute of limitations for the IRS to ASSESS taxes if returns were never filed. So better to file them showing refunds owed than risk the IRS creating Substitute for Returns (SFRs) that might not include all deductions and credits he was entitled to.