Insights and Resources
New user fee proposed for estate tax closing letters
TAX ALERT |
Authored by RSM US LLP
The Internal Revenue Service (IRS) issued proposed regulations establishing a new user fee of $67 for authorized persons who wish to request the issuance of an estate closing letter. This will apply to requests received by the IRS 30 days after the regulations become final.
An estate closing letter informs the authorized person of the acceptance of the Form 706 estate tax return and also contains other tax information including the amount of the net estate tax, the state death tax credit or deduction, and any generation skipping transfer tax. An authorized person refers to a person properly authorized under section 6103 of the Internal Revenue Code (Code) to receive and request an estate closing letter with respect to the estate, which includes, but is not limited to, the executor, personal representative or authorized party under an executed Form 2848, Power of Attorney and Declaration of Representative. The executor is responsible for addressing unpaid estate liabilities including estate taxes and can be held personally liable for the payment of tax under certain circumstances. The estate tax closing letter explains that the IRS will not reopen or examine the estate tax return to determine the estate tax liability of a decedent’s estate unless the estate notifies the IRS of changes to the estate tax return or if there is (1) evidence of fraud, malfeasance, collusion, concealment or misrepresentation of a material fact, (2) a clearly defined substantial error based upon an established IRS position or (3) a serious administrative omission. The closing letter does not indicate whether estate tax has been paid but it provides the executor with information regarding the estate tax liability so that assets may be divided, distributed and the estate may be closed.
The estate tax closing letter is not required by the Code but has been a practice offered to aid in estate administration. The IRS issued an estate closing letter for every estate tax return filed until June 2015 when the IRS issued this letter on request by an authorized person. An alternative method was provided by obtaining an account transcript in lieu of the previously issued estate closing letter that included Transaction Code 421 which indicated the return was accepted as filed or the examination is complete.
The IRS estimates the number of estate tax returns filed in 2018 to be 30,500 with a large number of these filings electing portability of the DSUE amount for the surviving spouse. Since the closing letter is viewed by the IRS to be a convenience offered to the estate, it has been determined that a user fee would be appropriate to assist in recovering the costs incurred to provide this service. The IRS has proposed implementing a web-based system to request the estate closing letter and collect the user fee using the existing www.pay.gov website. This new “one-step, web-based procedure” is expected to improve efficiencies for both the estate and the IRS.
Call us at +1 213.873.1700, email us at firstname.lastname@example.org or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by Rebecca Warren, Lee Ann Couture and originally appeared on 2021-01-06.
2020 RSM US LLP. All rights reserved.
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Vasquez & Company LLP is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.
For more information on how Vasquez & Company LLP can assist you, please call +1 213.873.1700.
Subscribe to receive important updates from our Insights and Resources.