Prior to June of 2015 the IRS issued an estate tax closing letter for every estate tax return filed. This letter included the amount of net estate tax, the state death tax credit, and any generation skipping tax liability. On June 1, 2015 the IRS began to issue estate tax closing letters only to those who requested a closing letter at least four months after the estate tax return was filed.
In December 2017, the IRS provided new guidance on methods available to confirm that the IRS examination has been closed. An account transcript may be used instead of an estate tax closing letter. There is no charge from the IRS for the account transcript. The transcript will include a code 421 and a written explanation that the IRS has closed the examination.
In many estates the executor is a trusted family member who is not in the business of providing executor services. Although being named as an executor is an honor in the sense of trust with the assets and wishes of the deceased, there are many rules to follow and beneficiaries to please. It is important to consult with a professional who specializes in this area to make sure that tax law is followed as well as the legal aspects related to protecting and distributing the assets of the deceased according to their wishes. By obtaining an estate closing letter, the executor has officially started the statute of limitations with the Internal Revenue Services which will last three years. Once three years have passed, the executor is not held responsible for any tax that might be related to the estate.
To request an account transcript the estate representative may file a form 4506-T which is a Request for Transcript of tax return. In order for the IRS to process the estate return the IRS suggests not filing the 4506T or requesting a closing letter until four months after the return has been filed.
As an individual is making their estate plan it is especially important to consider naming the estate representative that is not only trusted but is capable of handling all of the duties of an executor. Often a corporate executor is the best choice not only for the experience of the corporate executor, but to relieve family members from a very difficult duty .
TD&T has experienced in preparing estate and trust tax returns as well as pre-death planning. It is important to visit with your CPA early in the stages of estate planning.
Vicki Beckey, CPA, CSEP, CFF has been in practice for 30 years and specializes in the Estate and Trust Area .
She has authored several articles on Estate and Trust related topics and has been a speaker at Estate and Trust conferences. Vicki spends much of her free time serving on three local nonprofit boards.