IRS issues new rules for estate tax closing letters

California taxpayers may be interested to learn that the Internal Revenue Service recently announced that it will no longer be sending out a letter notifying those who have filed Form 706, which is used to calculate a decedent's estate tax, that the filing has been accepted. The new rule applies to all estate tax returns filed after June 1, 2015.

The change was made because new portability rules caused the IRS to be swamped with more estate tax returns than it could handle. The government now requires an estate tax return to be filed for all estates using the portability option, whether or not there is an estate tax balance due. As a result, the IRS has ended courtesy notifications that Form 706 has been accepted. The agency will only issue the notifications upon the taxpayer's request.

Those who owe estate taxes must wait four months after filing Form 706 to request a notification letter. This means that taxable estates may have to delay distributions to beneficiaries. For tax returns with no errors or special circumstances, the IRS website indicates a requested closing letter should be issued within four to six months from the Form 706 filing date. If an estate doesn't receive an expected closing letter within that time frame, it could mean that the estate is being audited for a potential estate tax assessment. Spouses filing Form 706 strictly for the portability exemption are generally not in a rush to receive a closing letter, but they may wish to request one for their peace of mind.

Regulations for estate taxes are complex. California residents wishing to make an estate plan may benefit by consulting with an attorney.


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