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New IRS Rule for Estate Tax Closing Letters

Posted on: July 7th, 2015
estate tax closing letterThe Internal Revenue Service (IRS) issues an estate tax closing letter to acknowledge receipt and review of a federal estate tax return. In the past, these letters were routinely issued upon review about 4-6 months after receipt of the return as long as inaccuracies were not found. However, the IRS recently changed protocol and taxpayers are required to request a letter in order to receive one. (Should the IRS suspect an error, instead of a closing letter the IRS sends a notice of audit.)

Most states require an estate tax closing letter from the IRS before an executor or other qualified representative files the decedent’s state estate tax return. A copy of this letter could be critical in order to remove tax liens placed on the decedent’s property or other matters. 

Every state’s requirements and deadlines are unique. For example, Florida requires the closing letter to be filed with the probate court in order to close the estate. North Carolina requires the closing letter to be filed with the Department of Revenue within two years of its receipt. New York requires a state estate tax return be filed within nine months of the decedent’s date of death. Asset distribution to beneficiaries could be delayed as a result of this lengthy process. Extensions are possible, but time is generally of the essence for estate tax documentation. Complications could develop now that federal estate tax closing letters are not automatically delivered.

How should individuals request a copy of the estate tax closing letter? Although the IRS has announced that a request is necessary in order to receive a copy, they have not yet provided a specific process for issuing requests. It appears calling the IRS directly might be the most favorable method, per their recent announcement:

For all estate tax returns filed on or after June 1, 2015, estate tax closing letters will be issued only upon request by the taxpayer. Please wait at least four months after filing the return to make the closing letter request to allow time for processing. For questions about estate tax closing letter requests, call (866) 699-4083.

Executors are required to pay estate tax due. If they make an error with the tax value or neglect to pay a certain tax, they could be held personally liable for the debts. Navigating probate and estate administration is often easier with the professional guidance of an experienced probate attorney. Learn more about an executor’s responsibilities during estate administration.

By Attorney Samantha Reichle
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