How to Prove Funds Are Inheritance to the IRS
When you receive an inheritance, you must report the inheritance to the Internal Revenue Service. In some cases, representatives will ask you to verify the inheritance amount, particularly if the amount is high or if the amount the executor reports to the IRS does not match the amount you say you received. If the IRS asks you to prove that you received the inheritance and what the amount was, you need to gather as much documentation as you can about the inheritance and give it to the IRS representatives.
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Instructions
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Go through your records. Look for any documents that show that your benefactor passed away and left you an inheritance. Examples of these documents include copies of the death certificate, will, letters to and from the probate court or estate executor, transfer of ownership forms, probate claim and demand forms and personal correspondence from the benefactor.
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Contact the estate executor. Ask the executor to send you a letter verifying you received the inheritance, what the amount was and when it was received. Do this only if you do not already have correspondence from the executor detailing these items. The amount the executor lists should match the amount indicated in the will, court documents and transfer of property documents.
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Contact the probate court clerk. Request copies of all documents related to the estate of your benefactor by filing a demand notice if you have not already done so. These records should show the intent of the benefactor and the actions of the executor, including transfer of the inheritance funds.
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Contact any financial institution to which you or the executor transferred the inheritance, such as your bank. Ask the institution for copies of the check you deposited or direct deposit authorization from the executor. Also ask for copies of your statement that show the institution processed the transaction properly.
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Make copies of all the documentation you've gathered regarding the inheritance. Together, everything should verify the amount you received and the fact you legally are entitled to the money.
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Write a letter to the IRS that shows your inheritance claim was in question. Indicate the year of the return involved and how you filed, as well as basic information like your contact information and name. State that you are enclosing documentation to verify that the amount claimed as an inheritance was accurate.
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Send your letter certified mail to the branch of the IRS where you normally send your returns. If you know the name of your auditor, you can list him as the addressee, but any IRS agent should be able to pull up your records and get the situation straightened out for you. If your auditor feels a face-to-face meeting is necessary, contact the IRS to schedule the meeting with the auditor and provide him with your documentation at that time.
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Tips & Warnings
As a courtesy, send a letter to the IRS acknowledging receipt of their inquiry before you gather your documents. Indicate that you maintain the accuracy of your reported inheritance and will gather documentation for verification purposes. This way, the auditor knows you are trying to handle the situation. A positive attitude makes a difference.
Never send or give any original documents to the IRS. The IRS handles millions of returns and refunds each year, and mistakes do happen. Do not assume that it will be able to keep track of or return your records.
