If You Want an Estate Tax Closing Letter, You Now Have to Ask for It

For estates that are required to file a Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return*, it is advisable not to close the estate until you know that the IRS has completed its examination of the return and has accepted it (either with or without adjustment). Until relatively recently, the IRS would notify you that the return had been accepted by sending an estate tax closing letter. However, that is no longer the case.

For estate tax returns filed after June 1, 2015, the IRS will only issue estate tax closing letters upon request. Specifically, the executor must call the IRS at (866) 699-4083 and provide the following information:

  • Name of the decedent;
  • Decedent’s social security number;
  • Date of death.

Afterward, the IRS will prepare the closing letter and issue it to the executor at the address of record. The IRS advises (requires?) that you wait at least four months before calling.

Alternatively, the executor may request an account transcript for the estate as a substitute for the closing letter. An account transcript is a computer-generated report that provides current account data. The information reported on an account transcript includes:

  • the return received date,
  • payment history,
  • refund history,
  • penalties assessed,
  • interest assessed,
  • the balance due with accruals, and
  • the date on which the examination was closed.

An account transcript

presents this account data by including transaction codes together with the descriptions of those codes. An account transcript that includes transaction code “421” and the explanation “Closed examination of tax return” indicates that the IRS’s examination of the estate tax return has been completed and that the IRS examination is closed…. Accordingly, an account transcript showing a transaction code of “421” can serve as the functional equivalent of an estate tax closing letter. 

You can request an account transcript by filing Form 4506-T. For those who dread calling the IRS and waiting on hold, or who just prefer to avoid poking the sleeping IRS bear, the transcript approach will be preferable.

Note that even if the estate tax return has been accepted, the IRS can reopen the estate for re-examination. However, according to Rev. Proc. 2005-23, it will not do so unless:

  1. There is evidence of fraud, malfeasance, collusion, concealment, or misrepresentation of material fact;
  2. The closed case involved a clearly-defined, substantial error based on an established Service position existing at the time of the examination; or
  3. Other circumstances exist indicating that a failure to reopen the case would be a serious administrative omission.

* Estates required to file are generally those in which the GROSS estate plus adjusted taxable gifts exceeds the Basic Exemption Amount (currently $5,490,000), regardless of whether the net estate (gross estate less deductions) is taxable.

Source: Frequently Asked Questions on Estate Taxes; Notice 2017-12 (pdf)

Posted by Joel D. Roettger, JD, LLM, EPLS

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