Estates Must Now Request a Closing Letter

July 31, 2015

The IRS has announced that it will issue estate tax closing letters only on request for estate tax returns filed on or after June 1, 2015.

Prior to this change, CPAs and clients anxiously awaited the closing letter for filed estate tax returns. A very large portion of returns are audited. Receiving the closing letter meant that the IRS had accepted the return (Form 706, United States Estate Tax Return) as filed and it would not be audited.

The IRS recommends waiting at least four months after filing your Form 706 return before requesting a closing letter.

If you filed your estate tax return before June 1, 2015, the IRS will continue its policy of issuing closing letters provided the return is accepted as filed and has no other errors or special circumstances. Expect to wait four to six months to receive the letter.

Not all returns filed before June 1, 2015, will receive a closing letter. The IRS will not issue a closing letter for any return that was filed after Jan. 1, 2015, but before June 1, 2015, that did not meet the filing threshold for an estate tax return and whose taxpayer portability election was rejected by the IRS.

The filing threshold simply means the gross value of the estate. Those numbers are indexed for inflation and are as follows:

2015 – $5,430,000

2014 – $5,340,000

2013 – $5,250,000

A portability election allows a deceased spouse to transfer the estate’s unused exclusion amount to the surviving spouse. The IRS gives a great deal of attention to the estate tax return when a portability election is made, so the election must be made properly.

For returns filed after Jan.1, 2015, and before June 1, 2015, the IRS will still issue a closing letter if the estate met the filing threshold. In addition, if the filing threshold was not met, but no portability election was made, you will still receive a closing letter.

If you have any questions about estate tax closing letters, please contact your CPA.