What's New - Estate and Gift Tax

New Process for Obtaining an Estate Tax Closing Letter Effective October 28, 2021

Final regulations, User Fee for Estate Tax Closing Letter (TD 9957PDF), establishing a new user fee of $67 for persons requesting the issuance of IRS Letter 627, Estate Tax Closing Letter (ETCL) will be effective October 28, 2021. For more information see Frequently Asked Questions on the Estate Tax Closing Letter.

New Estate Tax Return Retention Period – Instructions to Obtain Copies

In June 2019, the National Archives and Records Administration (NARA) and the Office of Management and Budget issued a government-wide policy memorandum titled Transition to Electronic Records. The memo outlined new goals for electronic recordkeeping to support the transition to a fully electronic government. It requires federal agencies to manage records electronically, to the extent possible, by January 2023. This aligns with the Federal Records Act of 1950, which requires economical and efficient records management. Agencies achieve these goals by storing and managing records in electronic and local storage and in NARA’s Federal Records Centers (FRC). These methods ensure the proper access, preservation, and timely disposal of records according to records control schedules and federal laws.

NARA’s FRCs will no longer accept paper files after December 31, 2022, so the IRS reviewed its current policy regarding a 75-year retention period for estate tax returns and related gift tax returns. Given volume, storage costs, the rarity of requests for these paper returns, and no adverse effect on agency or taxpayer needs for the records, IRS proposed reducing the retention period to 40 years. This recommendation considers litigation and potential collection actions. Once NARA approves the shorter retention period, the IRS will properly destroy estate tax and related gift tax returns in the FRCs that are older than 40 years.

This is a courtesy notice to taxpayers who may want to request an older estate tax return, including attachments, before the returns are destroyed. Related attachments may include appraisals, gift tax returns and other required documents.

A requester must have authorization to receive tax information of a decedent or their estate. To obtain a copy of a tax return, use IRS Form 4506, Request for Copy of Tax Return. There is a fee for each return requested. The deadline to request returns older than 40 years is February 11, 2022, which is 120 days from the posting of this notice. Submit the following with any request:

• The decedent’s complete name, address and Social Security number
• A copy of the death certificate, and either
  • A copy of Letters Testamentary approved by the court, or
  • IRS Form 56, Notice Concerning Fiduciary Relationship, if there is no court proceeding

Please visit the Estate and Gift taxes page for more information regarding federal estate and gift tax returns. 

Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic, Related to Estate, Gift, and Generation-Skipping Transfer Tax Filing and Payment Deadlines

Notice 2020-20, Federal income tax filing and payment relief on account of Coronavirus Disease 2019 (COVID-19) emergencyPDF. This notice provides relief in addition to the relief provided in Notice 2020-18PDF, issued on March 20, 2020. In this notice, the Treasury Department and IRS are providing relief to all taxpayers who have Federal gift (and generation-skipping transfer) tax returns and payments due on April 15, 2020. The April 15, 2020 deadline is postponed to July 15, 2020. Associated interest, additions to tax, and penalties for late filing or late payment will be suspended until July 15, 2020.

Notice 2020-20 will be in IRB 2020-16, dated April 13, 2020.

Notice 2020-23PDF amplifies relief to additional returns, tax payments and other actions. Extensions generally now apply to all taxpayers that have a filing or payment deadline falling on or after April 1, 2020, and before July 15, 2020. Individuals, trusts, estates, corporations and other non-corporate tax filers qualify for the extra time. Anyone, including Americans who live and work abroad, have until July 15 to timely file their 2019 federal income tax return and pay any tax due.

More information on tax relief is available at IRS.gov/coronavirus.

Mailing Address Changes for Estate and Gift Tax Returns

See Filing Estate and Gift Tax Returns for information on new mailing addresses for Form 709, and the Form 706 series (706, 706-NA, 706-GS(D), 706-GS(T), 706 Schedule R-1, 706-A, and 706-QDT), as well as Forms 8892 and 8855.

Making Large Gifts Now Won't Harm Estates After 2025

On November 26, 2019, the IRS clarified that individuals taking advantage of the increased gift tax exclusion amount in effect from 2018 to 2025 will not be adversely impacted after 2025 when the exclusion amount is scheduled to drop to pre-2018 levels. The IRS formally made this clarification in final regulations released that day. The regulations implement changes made by the Tax Cuts and Jobs Act (TCJA), tax reform legislation enacted in December 2017. For more information, see the related Tax Reform page.

Transcript Delivery Service (TDS) Now Available for Estate Tax Accounts

The Transcript Delivery Service (TDS) which provides authorized practitioners the ability to view and print instant account transcripts for estate tax returns is now available on IRS.gov.

To register for TDS, access e-Services - Online Tools for Tax Professionals

1. Select "GO" under Transcript Delivery System (TDS)

2. Sign Up or Log In

If you have difficulty registering online via Secure Access, or you are an existing e-Services user and need exception processing, call the e-Help desk at 1-888-841-4648 (select your language, then prompt 1 and remain on the line until an assistor picks up) 7:30 a.m. Eastern to 7 p.m. Eastern. Additional tips can be found in the e-Services Hot Topics.

For step-by-step instructions on securing an estate tax transcript, access Transcripts in Lieu of Estate Tax Closing Letters on IRS.gov.

The Tax Cut and Jobs Act, Pub. L. No. 115-97

Under this law, the basic exclusion amount for an estate tax return for a 2018 date of death increases to $10,000,000, before taking into account the necessary inflation adjustment. See the sections Form 706 Changes and Exclusions, below, for the 2018 basic exclusion amount.

For more information on tax reform affecting estate and gift taxes, access Estate and Gift Tax FAQs.

Notice 2017-15, Guidance on Windsor-related Estate, Gift, and Generation-Skipping Transfer Issues

Notice 2017-15 provides guidance on the application of the decision in United States v. Windsor, 570 U.S. ___, 133 S. Ct. 2675 (2013), and the holdings of Revenue Ruling 2013-17, 2013-38 I.R.B. 201, to the rules regarding the applicable exclusion amount under §§ 2010(c) and 2505 of the Internal Revenue Code, and the generation-skipping transfer (GST) exemption under § 2631, as they relate to certain gifts, bequests, and generation-skipping transfers by (or to) same-sex spouses. In particular, this notice provides special administrative procedures allowing certain taxpayers' estates to recalculate a taxpayer's remaining applicable exclusion amount and remaining GST exemption to the extent an allocation of that exclusion or exemption was made to certain transfers made while the taxpayer was married to a person of the same sex.

Worksheets and instructions to aid recalculations will be posted soon.

Consistent Basis Reporting Between Estate and Person Acquiring Property from Decedent

On March 23, 2016, the IRS issued Notice 2016-27, which provides that statements required under section 6035, regarding the basis of property distributed from the estate of a decedent, need not be filed or furnished until June 30, 2016. Other notices had previously delayed the filing of such statements. See Notice 2016-19PDF, Notice 2015-57PDF, and temporary regulations, T.D. 9757.

In addition, proposed regulations, REG-127923-15, provide guidance regarding the requirement that a recipient's basis in certain property acquired from a decedent be consistent with the value of the property as finally determined for Federal estate tax purposes.

The statements noted above are required by H.R. 3236, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, which was signed into law on July 31, 2015.

The law created Section 6035, which requires the executor of an estate required to file an estate tax return to also provide certain statements to the IRS and to beneficiaries receiving inherited property. This also applies to 6018(b) filers.

Note: If the estate is not required to file an estate tax return (see Which Estates Must File in the Instructions for Form 706PDF, and Who Must File in the Instructions for Form 8971PDF, please do not file Form 8971. Doing so may result in unnecessary correspondence from the IRS. 

The law also adds Section 1014(f), which requires consistent basis reporting between an estate and the beneficiary receiving certain property from a decedent.

These changes apply to any estate tax return filed, and to property with respect to which an estate tax return is filed, after July 31, 2015.

Form 706 Changes

The basic exclusion amount (or applicable exclusion amount in years prior to 2011) is $1,500,000 (2004-2005), $2,000,000 (2006-2008), $3,500,000 (2009), $5,000,000 (2010-2011), $5,120,000 (2012), $5,250,000 (2013), $5,340,000 (2014), $5,430,000 (2015), $5,450,000 (2016), $5,490,000 (2017), $11,180,000 (2018), $11,400,000 (2019), $11,580,000 (2020), $11,700,000 (2021), and $12,060,000 (2022).

For Estate Tax returns after 12/31/1976, Line 4 of Form 706, United States Estate (and Generation-Skipping Transfer) Tax ReturnPDF, lists the cumulative amount of adjusted taxable gifts within the meaning of IRC section 2503. The computation of gift tax payable (Line 7 of Form 706) uses the IRC section 2001(c) rate schedule in effect as of the date of the decedent's death, rather than the actual amount of gift taxes paid with respect to the gifts.

With the top bracket tax rates decreasing from 55 percent (in 2001) to 35 percent (in 2010), and then increasing to 40 percent (in 2013), the IRS has encountered situations where gift taxes paid were greater than the tax calculated using the rate in effect at the date of death.

It appears that some Form 706 software used by practitioners require a manual input of the gift tax payable line. Some preparers are reporting gift taxes actually paid rather than calculating the gift tax payable under date of death rates. These errors result in underpayment of estate tax due. Cases with this issue will involve estates where large gifts were made during life and at a time when tax rates were higher than at date of death. (Posted 6-5-06)

Beginning January 1, 2011, estates of decedents survived by a spouse may elect to pass any of the decedent's unused exclusion to the surviving spouse. This election is made on a timely filed estate tax return for the decedent with a surviving spouse. Note that simplified valuation provisions apply for those estates without a filing requirement absent the portability election. See the Instructions to Form 706 for additional information.

Exclusions

• The annual exclusion for gifts is $11,000 (2004-2005), $12,000 (2006-2008), $13,000 (2009-2012) and $14,000 (2013-2017). In 2018, 2019, 2020, and 2021, the annual exclusion is $15,000. In 2022, the annual exclusion is $16,000.
• The basic exclusion amount (or applicable exclusion amount in years prior to 2011) for gifts is $1,000,000 (2010), $5,000,000 (2011), $5,120,000 (2012), $5,250,000 (2013), $5,340,000 (2014), $5,430,000 (2015), $5,450,000 (2016), $5,490,000 (2017), $11,180,000 (2018), $11,400,000 (2019), $11,580,000 (2020), $11,700,000 (2021), and $12,060,000 (2022).

Federal Transfer Certificates (International)

For more information about securing a transfer certificate, please see:

• Transfer Certificate Filing Requirements for the Estates of Nonresident Citizens of the United States
• Transfer Certificate Filing Requirements for the Estates of Nonresidents not Citizens of the United States

Form 706 Filing Instructions

The instructions (which include rate schedules) may be found on the Forms and Publications - Estate and Gift Tax.

There are few significant changes to Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. The one change that will impact all filers is the elimination of the allowable State Death Tax Credit; for decedents dying in 2005 and later years, it is a deduction.

If you are filing a request for an extension of time to file an estate or gift tax return, remember that the request must go to the Cincinnati Service Center, even if you file your income or other tax returns elsewhere.

The instructions to Form 706 contain detailed guidance on completing the form and the required documentation to include with estate tax returns being filed solely to elect portability.