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Estate Tax Closing Letters

March 12, 2021
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Due to reductions in personnel being physically located at IRS Service Centers, review of tax filings and the associated responses and information normally provided by the IRS are severely delayed. This is certainly true for any taxpayer who filed an estate tax return (Form 706) during the pandemic. That being the case, what can an estate executor or representative do to move the process along? File for a closing letter from the IRS.

IRS Closing Letter

An estate tax closing letter informs the estate representative of the acceptance by the IRS of the estate tax return as filed and other important information as well, such as the amount of the net estate tax, any state death tax credit or deduction or any GST Tax for which the estate is liable. Receiving a closing letter from the IRS assists the estate representative in distributing the assets of the estate without the risk of incurring personal liability for unpaid estate tax in making final distributions to the beneficiaries.

The number of estate tax filings has increased substantially in recent years due to those filed solely to elect portability of the deceased spousal unused exclusion (DSUE) amount for the surviving spouse of the decedent. The only way for a surviving spouse to elect to use a deceased spouse’s unused exclusion amount is to file a Form 706. Due to budgetary constraints, the IRS is proposing to recover the costs associated with the provision of estate tax closing letters by charging a filing fee. In addition, the IRS is exploring options to establish a more convenient, web-based procedure for requesting the estate tax closing letter and paying the user fee. This is in response to negative feedback from taxpayers who have complained of having to submit multiple requests through the telephone-based system that existed before the COVID-19 pandemic. Due to COVID-19, an estate representative or other authorized person currently may only request an estate tax closing letter by fax.

If you have any questions about closing letters or any of the subjects mentioned above, contact Kevin Lenhard at kjl@kjk.com or 216.736.7226.

 

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