4.25.2 Campus Procedures For Estate and Gift Tax

Manual Transmittal

August 30, 2018

Purpose

(1) This transmits revised IRM 4.25.2, Estate and Gift Tax, Campus Procedures for Estate and Gift Tax.

Material Changes

(1) Changed title to Estate and Gift Tax, Campus Procedures for Estate and Gift Tax.

(2) This is now divided into four subsections: Account Maintenance Activities, Collection Activities, Exam Activities and Other Information. Subsections have been added to address the variety of work processes performed by Estate and Gift employees. This revised previous sections to clarify and reorganize instructions.

(3) 4.25.2.1, Program Scope and Objectives. Changed the overview subsection title and added relevant internal control information.

(4) 4.25.2.1.4, Acronyms. Compiled a list of frequently used abbreviations and their definition.

(5) 4.25.2.2, Forms - General Information. Added to provide general information about Estate and Gift forms.

(6) 4.25.2.2.1, Mail Desk. Added to provide mail desk procedures.

(7) 4.25.2.3, Account Maintenance Activities. Added to provide a breakdown of the account work.

(8) 4.25.2.3.1.1, Amended Form 706 and Form 706-NA. Added procedures.

(9) 4.25.2.3.1.2, Amended Form 709. Added procedures.

(10) 4.25.2.3.1.3, Correspondence. Added procedures.

(11) 4.25.2.3.1.4, Phones. Added procedures.

(12) 4.25.2.3.1.5, Transcript. Provided link for resolving account problems identified on the Account Maintenance Research (AMRH) transcripts.

(13) 4.25.2.3.2, Non-Masterfile Accounts. Added Form 706-A and Form 706-QDT.

(14) 4.25.2.3.3, Miscellaneous Forms. Added procedures for Form 4810, Form 5495, Form 8971 and Schedule PC.

(15) 4.25.2.4, Collection Activities. Added to provide a breakdown of the various collection activities.

(16) 4.25.2.4.1, Understanding Estate Accounts. Added to provide general information.

(17) 4.25.2.4.2, Extensions. Updated to clarify some of the instructions and reorganize the layout. 4.25.2.4.2.1 through 4.25.2.4.2.6 replaces extensions 4.25.2.1.1 through 4.25.2.1.5.

(18) 4.25.2.4.2.5, Form 1127 Application for Extension to Pay Due to Undue Hardship. Added procedures.

(19) 4.25.2.4.3, IRC 6166 Installments. Updated to clarify some of the instructions and reorganize the layout. 4.25.2.4.3.1 through 4.25.2.4.3.12 replaces 4.25.2.1.5 through 4.25.2.1.25.

(20) 4.25.2.4.4, Voluntary Early Termination. Added procedures.

(21) 4.25.2.4.5, Miscellaneous IRC Section 6166 Campus Termination Issues. Added procedures.

(22) 4.25.2.4.6, Closed IRC 6166 Cases. Added procedures.

(23) 4.25.2.4.7, Lien Package. Updated instructions.

(24) 4.25.2.4.8, Monitoring International Accounts. Added procedures.

(25) 4.25.2.5, Exam Activities. Added to provide a breakdown of the various exam activities.

(26) 4.25.2.5.1, General Information. Added information including AIMS activity codes.

(27) 4.25.2.5.2, Case Building. Added procedures.

(28) 4.25.2.5.3, Classification. Added procedures.

(29) 4.25.2.5.3.1, Perfection of Forms 706 and 709. Added procedures.

(30) 4.25.2.5.3.2, Stock Valuations. Added procedures.

(31) 4.25.2.5.3.3, Missing Returns - Open AIMS. Added procedures.

(32) 4.25.2.5.4, Closing Estate Returns. Added procedures.

(33) 4.25.2.5.4.1, Closing Procedures. Added procedures.

(34) 4.25.2.5.4.2, Closing Letters. Added procedures.

(35) 4.25.2.5.5, Referrals. Added procedures for informant and technical referrals.

(36) 4.25.2.5.6, Form 706-D and (D-1) Matching Program. Added procedures.

(37) 4.25.2.5.7.1, Form 3870 Request for Adjustment. Added procedures.

(38) 4.25.2.5.7.2, Payoff Requests. Added procedures.

(39) 4.25.2.5.7.3, Integrated Automation Technologies (IAT) Tool. Added procedures.

(40) 4.25.2.5.7.4, Identity Theft. Added link to IRM 25.23.9, BMF Identity Theft Processing.

(41) 4.25.2.5.7.5, Disaster. Added link to IRM 21.5.6.4 Freeze Code Procedures, for -O and -S Disaster Indicators.

(42) 4.25.2.6.1, Projects. Added possible project request.

(43) 4.25.2.6.2, Reports. Added list of reports used by Campus Estate and Gift.

(44) 4.25.2.6.3, IRM Links. Added links to exhibits for Unified Tax Rate Schedule, Computing State Death Tax Credit (1977-2004) and Estate and Gift Tax Facts.

(45) Exhibit 4.25.2-1, Estates-Pro-Rate Interest Without Overpayment. Added exhibit.

(46) Exhibit 4.25.2-2, Estates-Pro-Rate Interest with Overpayment. Added exhibit.

(47) Exhibit 4.25.2-3, Waiver of Right to Administrative and Judicial Review of Termination of IRC 6166 Election.

Effect on Other Documents

This material supersedes IRM 4.25.2, dated September 11, 2009.

Audience

Small Business/Self-Employed Campus Examination, Field Support Operation, Estate and Gift Tax Program Employees.

Effective Date

(08-30-2018)

Michael W. Damasiewicz
Director, Examination, Field and Campus Policy
Small Business/Self-Employed

Program Scope and Objectives

  1. Purpose: This IRM text pertains to the campus processing forms and correspondence that impact estate and gift tax accounts. This material provides direction that is estate and gift specific.

  2. Audience:

    • Supervisory Paralegal Specialist

    • Campus Estate Tax Attorney

    • Paralegal Specialist (Transfer Tax Technician)

    • Supervisory Tax Examining Technician

    • Lead Tax Examining Technician

    • Tax Examining Technician

    • Clerk

  3. Policy Owner: Director, Small Business/Self-Employed (SB/SE), Headquarters, Examination - Field and Campus Policy

  4. Program Owner: Program Manager, Campus Examination and Field Support

  5. Primary Stakeholders: Cincinnati Centralized Estate and Gift campus employees processing forms and correspondence that impact estate and gift tax accounts.

  6. Primary Goals: The program goals are to ensure timely processing of correspondence, amended returns, installments and appropriate classification of estate returns.

Background

  1. The site processes all items related to estate and gift returns. This includes responding to telephone inquiries, processing amended returns, processing extensions to file and pay, sending annual installment notices, computing interest on all estate accounts, classifying returns, building cases for classification details, establishing appropriate controls on classified returns, sending closing letters upon request, correspondence audits on work identified by workload selection, process IRC 6166 requests and screening gift returns.

  2. The site is a blended operation that provides service in the form of account maintenance activities, payment and filing activities, and reporting compliance activities. The IRM addresses all activities performed by the site with cross reference to other IRMs when appropriate.

Authority

  1. The information in this section is based upon the following authorities:

    1. IRC 2032A, Special Use Valuation

    2. IRC 2203, Definition of Executor

    3. IRC 6075(a), Time for Filing Estate and Gift Tax Returns

    4. IRC 6081, Extension of Time to File Estate and Gift Tax Returns

    5. IRC 6161, Extension of Time to Pay Estate Tax

    6. IRC 6163, Estate Tax Extension of Time to Pay

    7. IRC 6166, Installment Payments

    8. IRC 6501(d), Request for Prompt Assessment

Responsibilities

  1. The Director, Exam - Field and Campus Policy, reports to the Director, Headquarters Examination, and is responsible for the delivery of policy and guidance that impacts the field and campus examination process.

  2. Campus Exam and Field Support, which is under the Director, Exam - Field and Campus Policy, is the group responsible for providing Servicewide policy guidance on compliance processes that relate to campus examination operations and support Field Exam and Specialty programs in SB/SE and Large Business & International (LB&I).

Acronyms

  1. The following table lists commonly used acronyms and their definitions used throughout this IRM.

    Acronym Definition
    A/F Advance File
    AAF Accepted as Filed
    AIMS Audit Information Management System
    ALPHA Alphabetical
    AMRH Accounts Maintenance Research
    BLK Block
    BMF Business Master File
    BS Blocking Series
    CAF Centralized Authorization File
    CC Command Code
    CCA Case Control Activity System
    CCP Centralized Case Processing
    Closing Letter Letter 627
    CMN Certified Mail Number
    CP Computer Paragraph
    C-Site Consolidated Site - the storage area for all Form 709 dating back to 1976. C-Site is part of the Kansas City Campus and is located in Independence, MO.
    CUSIP Committee on Uniform Securities Identification Procedures
    DLN Document Locator Number
    DOD Date of Death
    DSUE Deceased Spousal Unused Exclusion
    E&G Estate and Gift
    EEFAX Enterprise Electronic Fax
    EGC Employee Group Code
    ERCS Examination Returns Control System
    ERS Error Resolution System
    ETA Estate Tax Attorney
    ETL Advisory Estate Tax Lien
    ETP Extension to Pay
    FTP Failure to Pay
    GRAT Grantor Retained Annuity Trust
    GST Generation Skipping Transfer
    HC Hold Code
    HQ Headquarters
    IAT Integrated Automation Technologies
    ID Identification Number
    IDRS Integrated Data Retrieval System
    IMF Individual Master File
    IMS Issue Management System
    IRC Internal Revenue Code
    IRSN Internal Revenue Service Number
    ITM IAT Tool Manager
    LI Late Installment
    MFT Master File Tax
    NIW National Inventory Wall
    NMF Non-Master File
    NSD No Source Document
    OFP Organized Function Program
    PC Priority Code
    PIC Penalty and Interest Code
    POA Power of Attorney
    QDT Qualified Domestic Trust
    RC Reason Code
    Rev. Proc. Revenue Procedure
    Rev. Rul. Revenue Ruling
    RO Revenue Officer
    RTR Remittance Transaction Research System
    SD Source Document
    SOI Statistics of Income
    SSN Social Security Number
    ST Status
    STAT Statutory
    TC Transaction Code
    TE Tax Examiner
    TIN Tax Identification Number
    TP Taxpayer
    TRANS-DT Transaction Date
    TTT Transfer Tax Technician
    VMS Voice Mail System
    WAAG Week at a Glance
    WSD Workload Selection and Delivery

Forms - General Information

  1. Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, is used by the executor of a decedent’s estate to report transfers subject to the federal estate tax imposed by Chapter 11 of the Internal Revenue Code (IRC), transfers subject to certain generation-skipping transfer (GST) taxes imposed at death under Chapter 13, and to determine the tax, if any, due on the reported transfers.

    Note:

    All returns with a short statute have priority whether original or amended. See IRM 25.6, Statute of Limitations, for additional information.

  2. In addition to the Form 706 identified above:

    • Form 706-A, United States Additional Estate Tax Return, is used to report the additional estate tax imposed by IRC 2032A(c), for an early disposition of specialty valued property or for an early cessation of a qualified use of specialty valued property.

    • Form 706-CE, Certificate of Payment of Foreign Death Tax, is used to provide evidence of payment of foreign death taxes.

    • Form 706-GS(D), Generation-Skipping Transfer Tax Return for Distribution, is used by a skip person distributee to calculate and report the tax due on distributions from a trust that are subject to the GST tax.

    • Form 706-GS(D-1), Notification of Distribution from a Generation-Skipping Trust, is issued by a trustee to report certain distributions from a trust that are subject to the GST tax and to provide the skip person distributee with the information needed to determine the tax due on the distribution.

    • Form 706-GS(T), Generation-Skipping Transfer Tax Return For Terminations, is used by a trustee to determine and report the tax due from certain trust distributions that are subject to the GST tax.

    • Form 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return, for the estate of a nonresident not a citizen of the United States, is used to complete the state and GST tax liability of the estate of a nonresident alien decedent.

  3. The Form 706 return and tax are due within nine months after the date of death, unless Form 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate Taxes, has been filed and the extension of time to file and/or pay has been approved.

  4. Form 706 is processed using Master File Tax Account (MFT) 52, Tax Period 000000. MFT 51 and MFT 52 require a “V” definer after the Social Security Number (SSN). All Forms 706 are generated automatically on Audit Information Management System (AIMS) (status 06, Employee Group Code (EGC) 1000 – domestic and status 06, EGC 1001 - international) and are pulled for classification. AIMS interfaces with the Examination Returns Control System (ERCS) and ERCS downloads information to the Issue Management System (IMS). IMS is used to maintain and store all audit records relating to estate and gift returns. Letter 627, Estate Tax Closing letters for Form 706, are issued upon request for accepted returns and returns in which the audit is closed.

  5. The table below shows the AIMS Status Codes and Definitions:

    Status Code Definition
    05 SOI
    06 Awaiting Classification
    08 Selected
    10 Assigned
    12 Started
    90 Closed

    Note:

    The AIMS status codes are used to determine how to reply and route correspondence.

  6. Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, is used to report transfers subject to federal gift and certain generation-skipping transfer taxes and to determine the tax due, if any, on those transfers. The return is due the year following the calendar year in which the gifts were made. If the donor dies during the year gifts were made, the Form 709 must be filed not later than the earlier of:

    • Due date (including extensions) of donor’s estate tax return (Form 706)

    • April 15 of the year following the calendar year the gifts were made

  7. The clerical team screens all filed Form 709 using criteria set by Workload Selection and Delivery (WSD). The returns meeting the criteria are classified by field examiners. The selected returns are established on AIMS. Accepted returns are sent back to Files.

    Note:

    Gift returns are stored at the C-Site which is part of the Kansas City Campus. Returns are filed alphabetically (ALPHA), not by Document Location Number (DLN) or SSN.

Mail Desk

  1. Mail is received twice a day (morning and afternoon). Date Stamp all receipts. Mail is sorted, batched and assigned by the mail desk. Sort the mail by form:

    • Form 706, amended or original

    • Form 709, amended or original

    • Computer Paragraph (CP) 190, amended return with no original

    • CP 193, Duplicate Filing Condition (no open AIMS)

    • CP 293, Duplicate Filing Condition (open AIMS)

    • Form 8892, Application for Automatic Extension of Time to File Form 709 and/or Payment of Gift/Generation-Skipping Transfer Tax, with attached Form 709

    • CP 193 & 293 – Most will have a Form 706 or Form 709 attached

    • Penalty abatement requests for Form 706 and Form 709

    • Form 4768, Application for Extension of Time To File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes – (Extensions to pay with money amount are batched separately)

    • Correspondence (including requests for closing letters, payment information, general questions)

    • Correspondence related to installments

    • Form 5495, Request for Discharge From Personal Liability Under Internal Revenue Code Section 2204 or 6905

    • Form 4810, Prompt Assessment request

    • Form 843, Claim for Refund or Request for Abatement

    • Form 8971, Information Regarding Beneficiaries Acquiring Property from a decedent

    • Form 1127, Application For Extension of Time for Payment of Tax Due to Undue Hardship

  2. The table below shows the sorting of the mail:

    Type of Mail Number in Batch Managerial Input Assign to
    Form 706 10 Give batches to management for information on case assignment Input ACTON on each account assigning to designated employee
    Form 709 10 Give batches to management for information on case assignment Input ACTON on each account assigning to designated employee
    CP 190,193, 293 10 Give batches to management for information on case assignment Input ACTON on each account assigning to designated employee
    Form 4768 – Additional sort needed. Sort by:
    • extensions to file only

    • extensions to pay (reflects money owed)

    Size of batches to be determined by management based on daily volumes. Batches of extensions to file are logged on batch control sheet for assignment. Batches for extensions to pay are assigned by management. Do not control using ACTON
    Form 8892 10   Do not control using ACTON
    Correspondence 10 Use management assignment list to assign work to tax examiners Input ACTON on each account assigning to designated employee
    Correspondence related to installments   Provide count to management Correspondence is given to employee assigned to installment
    Form 5495 5 Give to management to determine assignment Control using ACTON
    Form 8971     Sent to clerical team to be worked
    Form 706-GS(D-1)   Give to management to determine assignment Do not control using ACTON
    AMRH Transcripts Sent to Estate and Gift (E&G) electronically under IDRS # 028300005   Management assigns weekly Input ACTON on each account by taking over IDRS open control # 028300005 and assign to designated employee
  3. Sort the following by IDRS Number:

    • Form 4251, Return Charge-Out

    • Letter 249, Installment or Interest Due/Current Status Requested or Explained: Form 706

    • Letter 6335, Estate Installment Program replies

    • MFTRA and PINEX

  4. Control on Integrated Data Retrieval System (IDRS) using appropriate literals. The table below shows the work Activity, Description, Organizational Function Program (OFP) and the IDRS Control Category:

    Activity Description OFP Category
    Corr/Fax Account Work Correspondence 12402 TPCI
    Amd 706/709 Account Work Amended 12401 BDUP
    CP193 Account Work Amended 12401 DUPE
    CP293 Account Work Amended 12401 AUDE
    CP193 INTL Account Work International Amended 12403 IDPF
    CP293 INTL Account Work International Amended 12403 IDPA
    INTL Account Work International 12404 IOTH
    Form 4442 INTL Account Phone Work International 12406 ITLR
    Form 4442 Account Phone Work 12402 TWRO
    Form 843 Account Work Correspondence 12402 CLAM
    CP186 Account Work Correspondence 12402 C186
    CP190 Account Work Amended 12401 C190
    CP190 INTL Account Work International 12404 I190
    AMRH & CP270 Account Work Correspondence 12402 AMRH
    UNDLVR Mail Account Work Correspondence 12402 UNDL
    INV SSN Account Work Correspondence 12402 ENTC
    INVSSN INTL Account Work International 12404 IENC
    Action Request Account Work Correspondence 12402 IRRQ
    Forms/Miscellaneous Account Work Correspondence 12402 OTHE
    L249C Reply Account Work Correspondence 61302 L249
    L249C Bill Account Work Correspondence 61302 B249
    Technical Referral to ETA Account Work Correspondence 12402 TECT

Account Maintenance Activities

  1. Account Maintenance Activities are all activities that involve processing specific forms and correspondence submitted by the taxpayer.

Masterfile Accounts

  1. The following sections describe the procedures for amended returns, correspondence, phones and transcripts.

Amended Form 706 and Form 706-NA
  1. Estate amended returns are processed by examiners at the Cincinnati Campus.

  2. Amended Form 706 can be received as an unnumbered return with correspondence or as a numbered return, posting as a TC 976, causing a CP 193 or CP 293, Duplicate Filing Condition. This creates a "-A" freeze.

  3. The guidelines for processing amended returns are found in IRM 21.7.5.4, Estate and Gift Tax Returns and IRM 21.7.9, BMF Duplicate Filing Condition Procedures.

  4. When processing an amended return, verify the following:

    • Signature: Returns should have an original signature of the executor.

    • Power of Attorney (POA), Form 2848: Research for POA information on page 2 of the return or Form 2848, Power of Attorney and Declaration of Representative, attached to the return. Check the Centralized Authorization File (CAF) on IDRS to see if the Form 2848 has been processed. If not, fax a copy of the Form 2848, or pages 1 and 2 of the Form 706, to the CAF unit for processing. You will need to send the POA a copy of the closing letter, if requested, when your case is finished.

      Note:

      A Form 8821, Tax Information Authorization, may be used instead of Form 2848.

    • Correspondence: Search through the return for any correspondence the executor or preparer may have enclosed. Address the issues in the correspondence with a reply letter as needed.

  5. When processing amended returns, you need to research by checking the following:

    • SUMRY: Research account for multiple controls. Contact other tax examiners on multiple controls before processing the case.

    • ENMOD: Verify addresses and update if necessary.

    • BMFOL/IMFOL: Search IDRS using Command Code (CC) BMFOL/IMFOL and Universal CC for misapplied payments. You may also utilize Remittance Transaction Register (RTR) to confirm proper application of the payment(s).

    • E&G Database: Check Database for remarks and if necessary, follow the instructions.

    • AIMS: Check AIMS because any actions taken are based on the status of the case.

  6. When processing Form 706-NA, United States Estates (and Generation-Skipping Transfer) Tax Return, Estate of nonresident not a citizen of the United States:

    • Verify IDRS control is category IDPA.

    • Verify return is signed.

    • Verify return is timely filed.

    • Math verify the return using the E&G Microsoft Excel "706-NA Tax Comp" report found on the E&G "I" drive under "Form letters and Worksheets" . If there is a difference, check the Unified Credit. A Unified Credit of more than $13,000 should be checked to confirm the decedent residence was a treaty country or a U.S. possession. Form 8833, Treaty Based Return Position Disclosure Under IRC 6114 or IRC 7701(b), is used to claim treaty benefits. A statement attached to the return providing the information is acceptable. If the form or statement is missing, check the original filed return or request the information from the estate.

    • Secure the original return if AIMS is status 06, EGC 1001 or EGC 1002.

  7. The following are tips for Transaction Code (TC) 421:

    • Unpostable TC 421: Status 90 Closed on AIMS, but −L freeze still shown on tax module, input TC 421 using REQ77 to resolve −L freeze. ESTAB for the TC 421 unpostable document and wait for the TC 421 to post. If ESTAB document is not received after 14 days, submit Form 2275 to request a special search per IRM 3.5.61.5.4.2, Special Search Requests (Form 2275). Input the adjustment using Block (BLK) 06 to get a new refile DLN (with the original return). Use both the amended and original returns as source documents. The BLK 06 adjustments should be sent to Files in a brown adjustment folder, if available, or with an adjustment cover sheet.

    • Closed TC 421: Check the disposal code (DC) of TC 421. If DC 20, 31 or 32, the amended return can be worked with BRTVU. If additional information is required, request the original return from Files. If unable to secure the return from Files, you may call the POA or executor for a copy. If unable to contact the representative, send Letter 418, Amended/Original Return Unavailable, Copy Requested, to request a copy. If a TC 300 or TC 301 is posted to the module, secure the original return and audit report from IMS or Files, if the case is not on IMS. If unable to obtain, contact the estate representative or attorney for audit report and original return.

      Note:

      When calling the estate, the examiner should always provide appropriate identification to ensure the POA or representative knows the caller is an IRS employee authorized to discuss the matter with them.

    • If the Cincinnati Campus does not have the controlling TC 421 DLN, input the adjustment with BLK 18, Source Document (SD) and Remarks, to get controlling DLN. If you have the original return, use BLK 06. Use both the amended and original returns as source documents. The BLK 06 adjustment should be sent to Files in a brown adjustment folder if available or with an adjustment cover sheet.

  8. The following is additional information for processing amended returns:

    • Change to Tentative Tax: Input TC 290 .00 to indicate the amended return was received regardless of the −A freeze.

    • Amended Return Math Error: If there is a mathematical error that results in a tax increase on the amended return, print the tax computation report, fax or mail a copy of the report to the Executor/POA to sign for the change.

    • State Death Tax Credit/Deduction IRC 2011(c)(3) and IRC 2058(b)(2): If the required adjustment is the result of state death tax credit/deduction, use TC 770 .00 on the adjustment. There is no allowable interest for this issue.

Amended Form 709
  1. Gift tax adjustments follow the basic procedures of other BMF adjustments. Refer to IRM 21.7.5.4.7.3, Form 709 Tax Adjustments, and IRM 21.7.9.4, Duplicate Filing Conditions Procedures. Verify amended return information per IRM 4.25.2.3.1.1 (4). Research IDRS per IRM 4.25.2.3.1.1 (5), Amended Form 709 and Form 706-NA.

  2. When processing an amended Gift Return:

    • Verify the return is an amended and not a duplicate of the original by researching BRTVU figures.

    • If unable to verify by using BRTVU, prepare Form 2275 and request the original return from Files.

    • If the amended is a true duplicate, input a TC 290 for .00 with Hold Code (HC) 3 to release -A freeze on the account.

    • Math verify using the amended figures to determine if there is a tax change.

    • Refer any questionable issues to Transfer Tax Technician (TTT).

    • If the adjustment is due to a math error, follow general math error procedures in IRM 21.5.4.

  3. Form 709 – International Gift Return:Form 709, Part 1 Line 7 determines citizenship of taxpayer. A taxpayer is international if the citizenship shown on Line 7 in Part 1 of Form 709 is not United States, USA, etc. International taxpayers filing Form 709 should be referred to a TTT due to the unique differences from the domestic returns. For example:

    • Nonresident aliens may not claim the applicable credit amount.

    • A Non-U.S. citizen giving a cash gift from a foreign country to a U.S. citizen requires a Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts.

  4. The referral package should include a MFTRA U print for the donor and spouse, if the information is available. Notate on the referral document if the donor and/or spouse are foreign nationals. Process the amended return per instructions received from the TTT.

    Note:

    If both are US citizens and there is no indication of being an expatriate, process as a domestic return. See IRM 4.25.4.2.3, Expatriates, to determine when a taxpayer should be considered an expatriate.

  5. International Returns - Additional Information: Treaty listings are found at the following site: https://www.irs.gov/businesses/small-businesses-self-employed/estate-gift-tax-treaties-international. This site also includes information on the application of the unified credit. Form 8833 is the form used to claim treaty benefits. A statement attached to the return providing the same information is acceptable. If missing, check the original return for the form or request from the estate.

    Note:

    The United Kingdom of Great Britain and Northern Ireland (UK) includes: Northern Ireland, England, Scotland and Wales. The Republic of Ireland and Jersey/Channel Island are NOT part of the UK.

    Note:

    Prior to 1982, Forms 709 were filed quarterly. Quarterly Forms 709 may be received in E&G because of an audit or because of background work done by an attorney or CPA in preparation for filing Form 706. Any returns received for years 1981 and prior would be processed to the fourth quarter.

Correspondence
  1. Correspondence related to account questions or correction can be received on a variety of issues. This IRM section will provide procedures on frequently raised issues.

    Note:

    Policy Statement P-21-3 requires responding to the taxpayer within 30 days of the IRS received date. Issue an interim letter if unable to respond to the taxpayer request within 30 days. For additional information see IRM 4.119.4.21.1.12, Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61).

    Note:

    To ensure appropriate research refer to IRM 4.25.2.3.1.2 (2).

  2. Deceased Executor: In the event of the death of an estate executor and/or the appointment of a new executor:

    • Secure verification that the new executor was appointed by the estate. This involves securing the appropriate documentation such as Will, Letter of Testamentary, Court Appointment or other appropriate documentation.

    • When it becomes known that a new executor has been appointed for an estate, the Tax Examiner (TE) will research using IDRS CC CFINK to determine if a new or updated Form 2848 is on file. CFINK will show a new signature date and what information the POA is entitled to for a specific estate. If there is a new or updated Form 2848, the information may be disclosed to the POA on file.

      Note:

      Any new estate executor is required to update Form 2848 to include their information (name, address, phone number, etc.) even if they will continue to use the existing POA of the former executor.

    • If there is evidence that the executor appointed by the estate is deceased and/or a new executor is appointed, and there is no new/updated Form 2848 on file (CFINK), the TE must contact the new executor via a phone call or correspondence. The TE will advise the new executor that a new Form 2848 must be filed regardless of whether the same POA will be representing the estate. No release of information will be made to the POA until a new Form 2848 is received and approved by the IRS.

    • The new executor must file a Form 56, Notice Concerning Fiduciary Relationships, otherwise the new executor will not be authorized to execute a new Form 2848.

  3. Balance Due Notices: During processing, a line item on the return can be changed resulting in the estate receiving a balance due notice. This can happen with both domestic and international returns. The individual responsible for the estate normally contends that the tax is not owed. To resolve this issue:

    • Review the account and the return to determine the reason for the notice.

    • Verify the unified credit is correct.

      Note:

      For domestic, this is often changed during processing because the taxpayer filed on the incorrect year.

      Note:

      The unified credit is different for international returns ($13,000). An international estate may be entitled to more credit based on a valid treaty. International returns must reflect worldwide income to correctly pro rate the unified credit per a treaty. See the following for additional information: https://www.irs.gov/businesses/small-businesses-self-employed/estate-gift-tax-treaties-international. The unified credit for domestic returns is adjusted each year for inflation.

    • Determine the correct tax.

    • Abate the tax, if required, by inputting a TC 291 for the decrease in liability.

  4. Two Accounts for Same Estate: This frequently occurs with international accounts. The estate is given a Taxpayer Identification Number (TIN) beginning with a "9" to reflect an international temporary identification number. A return can be filed before the number is received resulting in two accounts. There can also be two returns for the same estate posted under different numbers. Research using IDRS CC NAMES, NAMEE and NAMEI. Check the extension database using any part of the name, as the estate may not have written the decedent’s name in the same manner as shown on the return. If two numbers have been assigned to the same decedent, provide the estate with the correct number to use. Follow the domestic procedures regarding merging accounts in IRM 21.7.10.4.1, Merge Account Procedures.

  5. Misapplied Payments: The estate can receive a balance due notice if a payment is not shown on the account. The payment may be misapplied or was incorrectly moved off the account. Check the following for the payment:

    • Decedent’s Individual Master File (IMF) account (TIN without a V)

    • Spouse’s account

    • SSN as Employer Identification Number (EIN) format (would be there as an unpostable)

    • Remittance Transaction Research System (RTR) to research payment amount and date

    • Integrated Automation Technologies (IAT) Tools for payment tracers

    Note:

    See IRM 21.5.7.3, Missing Payment Research, IRM 21.4.5, Erroneous Refunds, and IRM 21.5.8.4, IDRS Guidelines for Credit Transfers, if needed.

  6. Penalty Abatement Requests: Reasonable cause should be considered for both domestic and international returns when a request to remove penalties is received. When considering international returns, the lack of treaty with the domicile country does not prevent reasonable cause consideration.

  7. If processing a penalty abatement request for an international return, consider the following:

    • The decedent must be domiciled in the treaty country, not necessarily as a citizen.

    • It is unlikely the executor would have knowledge of the U.S. estate tax law so the penalty could be abated, but if the return was filed by an attorney, notary or other similar professionals, there would be a higher standard due to knowledge.

    • Use Reason Codes 062/030 if abating because the United States does not have a tax treaty with the country and not due to other reasonable cause.

    • For a list of treaty countries see: https://www.irs.gov/businesses/small-businesses-self-employed/estate-gift-tax-treaties-international

    Note:

    International cases with no open AIMS indicator and a balance due are held in the E&G international file. See IRM 4.25.2.4.8, Monitoring International Accounts.

  8. Check IDRS to see if the account is assigned to Collection or if there is a TC 421. If the account is assigned to Collection, forward the penalty adjustment request to the Revenue Officer assigned the case to consider the request.

  9. Open audits require contact with the field before any action is taken. Use the IMS database or e-mail to notify the Estate Tax Attorney (ETA) conducting the audit to advise of a request for a penalty abatement. Follow the instructions provided by the ETA. If the ETA wants to consider the issue during the audit, send the request to the field. Send Letter 86-C, Referring Taxpayer Inquiry/Forms to Another Office, to the estate stating the request will be addressed during the audit. Input a STAUP if needed.

  10. If the return is in EGC 1078 on the National Inventory Wall (NIW), send request to the National Gatekeeper.

    Note:

    The National Gatekeeper oversees classification sessions, assists classifiers, and answers technical and procedural questions.

    If return is in EGC 1036 Awaiting Classification, work the penalty abatement request and associate with the original return. If the return is in EGC 1000/1001:

    1. Secure the original return.

    2. Process penalty abatement request.

    3. Refer to TTT to classify.

    4. If accepted as filed, close AIMS.

    5. If selected, update AIMS to EGC 1078.

  11. A Form 5706, Case History Sheet, is required on all penalty abatement cases. It should establish the reason the estate feels the penalties should be removed, the TE's determination and the adjustment.

  12. Refer to TTT for abatement approval if the penalties are ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and if ≡ ≡ ≡ ≡ ≡ ≡ ≡ refer to ETA. All other requests are worked by the TE. Returns open on AIMS in a campus EGC with adjusted abatement requests of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , should indicate No Source Document (NSD). Attach paperwork to the original return and forward it to TTT for classification.

  13. Processing Penalty Denials:

    • Input a TC 290 for zero, BLK 98/99 and Reason Code (RC) 062, HC 3 and, if appropriate, Priority Code (PC) 1.

    • Prepare Letter 854, Penalty Waiver or Abatement Disallowed/Appeals Procedure Explained.

    • Attach to the abatement request document, a copy of the Letter 854 and a history sheet. Use these as the adjustment source document. Place in a brown adjustment folder or cover with an adjustment cover sheet to send to Files.

  14. Processing Penalty Abatements: Input the appropriate transaction codes to reverse the penalty in full or in part. Hold all information until the adjustment posts. If the account still shows a balance due on an international account, refile the documents in the international monitoring file. If the account is full paid, attach Form 10023-B, Attachment (To Be Associated With Return), and send to Files.

    Note:

    Refer to IRM 20.1.1.3.2, Penalty Relief/Reasonable Cause, for a listing and description of reasonable cause.

  15. Form 843 Claim for Refund and Request for Abatement: Refer to IRM 21.5.3.4, General Claim Procedures, for claim procedures.

Phones
  1. Employees are responsible for providing the best possible service to all taxpayers based on their function within the E&G Operation. Contact with taxpayers should instill confidence in the integrity and efficiency of the IRS by providing top quality customer service.

  2. Types of Incoming Calls:

    • General information for Form 706 and Form 709

    • Closing letter requests

    • Status of Form 706

    • Balance due notices

    • General information on GST

    • Form 706 and Form 709 transcript requests

    • Status of international transfer certificate

    • Form 4422, Application for Certificate Discharging Property Subject to Estate Tax Lien, requesting address to mail the form

  3. Key Points:

    • Maintain professional courtesy.

    • Control the direction of the contact.

    • Give accurate and complete assistance based on your job duties within the operation.

    • Resolve the taxpayer's issue, to the extent possible.

    • Do not use IRS jargon.

    • Do not address questions unrelated to E&G. Forward calls as appropriate.

    • Use appropriate hold procedures by giving a reason and thanking the taxpayer upon your return.

    • Clear voice messages daily and return calls within 1 to 3 business days.

    • If a caller indicates they have called more than two times without a response, notify the manager.

    Note:

    If a call is received within one hour of the toll free phone lines shutting down, the phone assistor has 24 hours to resolve the issue or open a control.

  4. Taxpayer Authentication: Always greet the caller with your name and 10-digit identification (ID) number. Prompt the caller for the tax form they are calling about.

  5. Use IAT Disclosure Tool when possible. For additional information on IAT Tools see IRM 4.25.2.5.7.3, Integrated Automation Technologies (IAT) Tools.

  6. The table below provides taxpayer authentication for Form 706:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  7. The table below provides taxpayer authentication for Form 709:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡ ≡ ≡ ≡
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡

    5. ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡ ≡
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡

    Note:

    The phone assistor will research using IDRS CC “CFINK” when a POA requests estate information. The POA must have a valid status on CFINK and will only be entitled to information as indicated on CFINK. In the event the information is not current on CFINK and/or you become aware that the executor has changed since the POA’s appointment, the assistor will not disclose any information and will request that a new Form 2848 be sent in by the new executor.

    Note:

    Although there are normally several individuals entitled to information from an estate, requested closing letters will be sent to the address of record, as provided on the estate tax return.

    Note:

    Refer to IRM 21.1.3.3, Third Party (POA/TIA/F706) Authentication, for POA authentication.

  8. To ensure quality service, E&G employees can provide the name and extension number of the E&G campus employee assigned to the taxpayer’s case when transferring the customer to the correct extension.

  9. Calls Unrelated to Estate and Gift: Calls unrelated to E&G should be transferred to the appropriate phone number.

    Note:

    Refer taxpayer to https://www.irs.gov/ website prior to giving out phone numbers or transferring a call.

  10. The table below provides a listing for transfer numbers:

    Issue: Transfer Number:
    IMF Accounts Management
    Phone Number: 800-829-1040
    Transfer Number: #92020 English
    Transfer Number: #92021 Spanish
    Form 1041 (Estate and Trusts) Accounts Management
    Phone Number: 800-829-4933
    Balance Due Refer TP to the phone number on the letter they received, and suggest they can make a payment on https://www.irs.gov/ with multiple options.
    Refunds Refund Hotline: 800-829-1954
    Taxpayer Advocate TAS: 877-777-4778

    Note:

    The above listing is not all inclusive. Refer to The Source for Telephone Numbers or SERP Campus Directory for additional numbers.

  11. International Calls: E&G has a phone voice mail system (VMS) dedicated to international phone calls. The number is 859-320-3456 and used by international callers who can’t use the 800 number. Check the international mailbox and voicemail daily and respond within three business days. The same domestic call disclosure rules apply to international calls. Incoming international calls may present a communication or language problem. The caller may be an interpreter or a TTY representative, calling on behalf of the executor. Follow IRM 11.3.3.2.1, Requirements for Oral Authorization. There may be people in the work area that can communicate in Spanish if needed, check with your manager. It may be helpful if you speak slowly, use short sentences, and ask the caller if the instructions are understood and have them repeat the instructions back.

  12. Incoming phone calls can be received over the ASPECT phone system or the unit phone. Some callers from Canada cannot call the U.S. toll free line. When possible, give the non-toll free number on outgoing correspondence as well as the toll-free number.

  13. If the caller claims they have submitted some type of document but does not know the SSN or Internal Revenue Service Number (IRSN), request them to spell the decedent’s first and last name, where decedent was domiciled and where the executor resides. Research using IDRS CC NAMES and NAMEE, ** in the country and it will bring up all foreign addresses under that name. NAMEI, 000 can be used as the zip code if foreign country. If a number is found, proceed with disclosure and assist the caller. Issue a letter to advise the estate of the correct number to use.

  14. If a SSN or IRSN number is not found, check the listing for transfer certificates found on the E&G common drive at: S:SBSE:CP:FSO:Dept 1, Common Area, Forms Letters and Work Sheet, International, Transfer Certificates. The listing is in ALPHA order and will indicate if a SSN/IRSN was provided. Access to this common drive is limited to specified campus employees.

  15. If no information is located, use the probe and response technique to establish the best course of action needed to help them. The assistor may need to request the information be faxed or resubmitted.

  16. Outgoing phone calls can be made on one line in each team. Check with your manager to confirm the correct line to use. Prior to making a call, the website http://www.countrycallingcodes.com/ can be used to confirm the international prefix and country code for the location being called. Be considerate of the time difference when calling another country.

  17. International Electronic Facsimile (E-FAX): E&G has an e-fax number for POA and executors located in the United States to use, 855-201-8011. The e-fax number for POA and executors located outside of the United States is 304-707-9970.

Transcripts
  1. For processing Accounts Maintenance Research (AMRH) transcripts, follow the procedures in IRM 21.2.4.3.

Non-Masterfile Accounts

  1. The following sections describe Non-Masterfile (NMF) accounts Form 706-A and Form 706-QDT.

Form 706-A
  1. Form 706-A, United States Additional Estate Tax Return, is used to report all dispositions or cessations of qualified use under IRC 2032A. See IRM 21.7.5.4.3, Form 706-A, United States Additional Estate Tax Return to report dispositions or cessations of qualified use under IRC Section 2032A.

Form 706-QDT
  1. Form 706-QDT, U.S. Estate Tax Return for Qualified Domestic Trusts, is used by the trustee/designated filer of a qualified domestic trust to determine and report tax on certain distributions, the value of property on the date of the surviving spouse’s death and the corpus portion of certain annuity payments. E&G assists NMF when secondary or duplicate returns are received by providing specific instructions on appropriate actions to NMF. TTT’s review the account and document making one of the following recommendations:

    • Associate with original return

    • Process as new return

    • Amend existing account

    Note:

    Verify that the Trust’s EIN is the TIN.

  2. To associate or process as a new return, provide instructions to NMF on action to take using Form 3210, Document Transmittal.

  3. To amend an existing account, prepare one of the following forms:

    • TAX INCREASE: Prepare Form 5734, Non-Master File Assessment Voucher

    • TAX DECREASE: Prepare Form 1331-B, Notice of Adjustment

    • CREDIT TRANSFER: Prepare Form 2424, Account Adjustment Voucher

  4. If an extension request is received on the Form 706-QDT, make the determination regarding the extension, notate whether it is approved and send to NMF for processing.

Miscellaneous Forms and Schedules

  1. The following sections describe the procedures for Form 4810, Request for Prompt Assessment Under IRC 6501(d), Form 5495, Request for Discharge from Personal Liability Under IRC 2204 or IRC 6905, and Form 8971, Information Regarding Beneficiaries Acquiring Property from a Decedent.

Form 4810
  1. Assign all Form 4810 to a TTT in a red statute folder.

  2. Requests that should be denied immediately:

    1. Those described below, in (3)(a), which do not qualify for prompt assessment consideration.

    2. Those requests that do not meet the other Form 4810 requirements stated in the instructions or in IRC 6501(d).

  3. Forms in the Form 706 series ineligible for IRC 6501(d) prompt assessment:

    1. IRC 6501(d) excludes from the request for prompt assessment those taxes imposed by chapter 11 of subtitle B, relating to estate taxes. Chapter 11 includes tax on: estates of citizens and residents (subchapter A), which includes Forms 706, 706-A, 706-QDT, and 706-D (Qualified Family Owned Business Interest (QFOBI) recapture returns, which are rare but could be filed pursuant to a Private Letter Ruling (PLR)) and estates of nonresidents not citizens (subchapter B), which includes Form 706-NA.

  4. Review Requests: Verify Form 4810 is complete using the following guidelines:

    1. Signed by Executor, Administrator or other Fiduciary representing estate of decedent.

    2. Request must be transmitted separately from any other document. Verify that the Form 709 return was filed prior to the Form 4810.

    3. Return form number and taxable period requested for the prompt assessment.

    4. If request is made via correspondence, request for prompt assessment must clearly indicate citing "under provisions of IRC 6501(d)."

  5. If request is incomplete or invalid for any reason, advise the requestor accordingly using Letter 621 with appropriate paragraph.

  6. If Form 4810 lists a Form 706 return, deny as stated in IRM 4.25.2.3.3.1 (3), unless the request pertains to GST tax. If GST tax is involved, forward to ETA for review and action determination prior to updating the Assessment Statute Expiration Date (ASED). Campus wants to avoid ASED confusion between the Form 706 estate return ASED and prompt assessment request for GST tax. Do not send the Form 4810 request to the National Gatekeeper if all gifts are a combination of:

    1. Gifts of cash to persons and/or

    2. Gifts of marketable securities where the securities were valued is provided or the value of the securities is under $1 million

  7. After verifying the listed Forms 709 have been filed, request all E&G returns listed on the forms and any additional Form 709 returns not listed regardless of open statute. (This pertains to Deceased Spousal Unused Exclusion (DSUE) and to determinations for classification and verification of accuracy of current filings.) Do not update the ASED on additional returns not listed on Form 4810. Do not hold the Form 4810 until the additionalForms 709 are received. Send the Form 4810 with the listed Form 709 gift returns to the National Gatekeeper for review and when the additional requested Forms 709 are received, associate with the Form 4810. When the requested Forms 709 are received, associate with the Form 4810. Attach a history sheet to the Form 4810 indicating the additional Forms 709 requested.

  8. There is a one day turnaround from receiving Form 4810 to requesting returns.

  9. Expedite return request due to short statute.

  10. After requesting returns for tax periods listed on Form 4810, input:

    1. TC 560 using REQ77 for all years listed on Form 4810.

    2. Send Letter 621, Prompt Assessment Request; Acknowledgement/Reply/Additional Information Requested, using paragraph H.

    3. Auto Select case.

    4. Send all returns with all IDRS research to the National Gatekeeper in a Red Folder with Form 13153, Attention: 6501(d), on case folder identifying as IRC 6501(d) Statute update.

    5. Any additional returns with open statute should be identified separately from returns listed on Form 4810 (FOR INFORMATION ONLY – ASED NOT UPDATED – RETURN NOT LISTED ON FORM 4810).

  11. If a Form 706 audit is open in the Field, notify the Field examiner immediately of the Form 4810 receipt. Follow procedures above for sending case to the National Gatekeeper for assignment and routing to Field ETA.

  12. When the requested returns are received, send to be associated with Form 4810.

  13. If the National Gatekeeper sends the Form 4810 back stating not sending to the field, consider accepted as filed. File the Form 4810 with the Form 709.

    Note:

    Do not send documents directly to the Field from the campus.

Form 5495
  1. Form 5495, Request for Discharge from Personal Liability Under IRC 2204 or IRC 6905, should be assigned to a TTT to make the determination if the request for discharge from personal liability should be granted.

  2. If the Service does not issue a notification of determination of estate tax within nine months of the received date of the request, the executor is automatically discharged from personal liability (applying only to them in their personal capacity and their personal assets).

    Note:

    These discharge requests are time sensitive and must be worked within 9 months of the received date.

    Note:

    Time limit for Fiduciary is 6 months.

  3. The following table provides instructions for Form 5495:

    IF: Then:
    No TC 150 posted:
    1. Indication return was filed,

    2. No indication that return was filed,

     
    1. Hold Form 5495 until TC 150 posts.

    2. Send Form 5495 back to originator advising a return must be filed before Form 5495 can be processed. Send Letter 738C, Decedent Income/Gift Tax Return; Personal Liability Discharge Request.

    Open AIMS:
    If there is an open AIMS for Form 706 and a Form 5495 related to gift taxes is received:
    1. EGC 1046,

    2. EGC 1056 (Campus ETA),

    3. EGC 1000, 1001,

    4. EGC 1036, 1078,

    5. In the Field for audit,


    The Form 5495 related to the listed (and filed) Forms 709, is considered along with the Form 706 and any additional Forms 5495.
    1. Pull the return and classify.

    2. Send to Campus ETA.

    3. Hold until in EGC 1046, then classify.

    4. Send Form 5495 to be associated with the return.

    5. Send Form 5495 to the Field.

    Return is accepted:
    1. Zero balance due on the account,

      Note:

      Once return is accepted, it is not necessary to wait for AIMS to close before sending Form 7990.

    2. Balance due on the account,

      Note:

      Never send a Form 7990/7990A when there is a balance due on the account.

    Send:
    1. Estate Return Form 7990, U.S. Estate Tax Certificate of Discharge from Personal Liability.
      Gift Return- Form 7990A, Gift Tax Certificate of Discharge from Personal Property.

    2. Letter 738, Decedent Income/Gift Tax Return; Personal Liability Discharge.

    Return is selected, Keep Form 5495 with the return.

    Note:

    Field classifiers will send Form 5495 to the campus to issue the certificate of discharge for any non-selected cases with zero balance due.

Form 8971
  1. On receipt of Form 8971, Information Regarding Beneficiaries Acquiring Property from a Decedent, check the Form 706 account to determine if the TC 150 has posted.

  2. Use the IF/THEN Table below to determine what should be done with Form 8971, based on if TC 150 has posted or not posted:

    IF THEN
    TC 150 has posted,
    1. On IDRS:

      1. Input a TC 971 Action Code 368 on the Form 706, MFT 52 account to show a Form 8971 was received.

      2. For TRANS-DT (transaction date) input Form 8971 received date.

      3. Remarks: NSD, Form 8971.

    2. Associate the Form 8971 with the Form 706 estate return by forwarding to:

      1. Advance File for all cases in AIMS status 06, EGC 1000 or 1001 or,

      2. Appropriate group if there is an open field examination or,

      3. Files with Form 10023-B, if AIMS is closed and no open controls, etc.

      Note:

      Do not send to an open IDRS control unless they have the original Form 706 return.

      Note:

      A TC 971 should not be put on an account if only have the Schedule A and no Form 8971. Associate the Schedule A with Form 706.

    TC 150 has not posted,
    1. Hold Form 8971 for 60 days monitoring for TC 150 to post:

      1. If TC 150 posts, follow steps 1 & 2 above.

      2. If TC 150 hasn’t posted, follow table below for when no TC 150 posts after holding Form 8971 for 60 days.

    After holding Form 8971 for 60 days and no TC 150 has posted, Issue Letter 5951, Form 8971 Filed – No Form 706 Filed – No Authority, to the person who filed the Form 8971 (see line 4, Form 8971). Allow 30 days for a response.
    Taxpayer responds with evidence of being executor, administrator, or IRC 2203 executor (in actual or constructive possession of decedent’s property), and after an additional 30 days no Form 706 has posted, Issue Letter 5950, Form 8971 Filed – No Form 706 Filed.
    Taxpayer responds without satisfactory evidence of having authority to file Form 8971, or taxpayer does not respond within the 30 days, verify that Form 706 TC 150 has not posted, Issue Letter 5952, Return Form 8971 to Taxpayer, with the first option box checked (no satisfactory evidence/authority).
    Taxpayer responds with a copy of the already filed Form 706 and proof of mailing (or an original, unfiled Form 706), Process as appropriate and associate the Form 8971 with the Form 706.
    Taxpayer responds stating the Form 706 was already filed, but did not provide a copy and proof of mailing, and after an additional 45 calendar days allowing Form 706 to post, if Form 706 does not post, Issue Letter 5952, Return Form 8971 to Taxpayer, with the second option box checked (no Form 706 filed).
    Taxpayer responds with correspondence stating a Form 706 will be filed (regardless of any date provided), hold the Form 8971 for 60 days from the date of taxpayer’s response. If no Form 706 posts,
    1. Review all the Schedules A filed with Form 8971. Does the total of all Columns E of all ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      1. No: Issue Letter 5952 with box 2 checked (no Form 706 filed).

      2. Yes: Make a copy of Form 8971 for WSD review. Issue Letter 5952 with box 2 checked (no Form 706 filed). Forward the copy of Form 8971 to WSD clerk for review as possible Form 706 non-filer.

    Taxpayer does not respond to Letter 5950 or states Form 706 has not been filed, should not have been filed or doesn’t need to be filed (or similar),
    1. Review all the Schedules A filed with Form 8971. Does the total of all Columns E of all ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      1. No? Issue Letter 5952 with box 2 checked (no Form 706 filed).

      2. Yes? Make a copy of Form 8971 for WSD review. Issue Letter 5952 with box 2 checked (no Form 706 filed). Forward the copy of Form 8971 to WSD clerk for review as possible Form 706 non-filer.

    Note:

    If a Schedule A is received not attached to a Form 8971, follow the IF/THEN table above.

    Note:

    If the TC 971 is input on an account that does not have a posted TC 150, the TC 971 will unpost.

Schedule PC
  1. Processing Schedule PC, Protective Claim for Refund:

    1. A protective claim can be filed with the return or submitted after the return is filed. A protective claim is normally filed on the Schedule PC and attached to the original return. Protective claims can be filed on an amended estate return. All protective claims must be processed so the account reflects that a claim was filed.

    2. To process, input a TC 971 with action code 700 via CC REQ77.

    3. Associate the protective claim with the return.

      Note:

      Protective claims can take years to resolve. The claim will remain open until the estate files a perfected claim. When that claim is processed, a TC 972 is input with action code 700 via CC REQ77 to show the issue is resolved.

Collection Activities

  1. The E&G campus handles various collection activities. The following sections provide guidance for processing extensions, installments, preparing lien packages and monitoring international accounts.

Understanding Estate Accounts

  1. When an Estate Tax Return is filed, it is processed and posted to the Business Master File (BMF). During the process, the return is marked with certain identifiable codes called Payment Indicators. When these indicator codes are identified in the system, CP 191, computer generated notices are issued to the campus. The codes and indicator explanations are in the following table:

    Code Explanation
    0 No Installment Privileges, payment indicator will follow normal BMF settlement procedures and will not generate a CP 191
    1 Installment privilege request under IRC 6166
    2 Extension requested under IRC 6161 or IRC 6163
    3 Combination of codes 1 and 2, for example, installment under IRC 6166 and extensions under IRC 6161

Extension of Time to File and/or Pay Estate Tax Return-IRC Sections 6081 and 6161

  1. The following sections provide guidelines for processing IRC 6081, Extension of Time to File, IRC 6161, Extension of Time to Pay and Estate Tax Extension of Time to Pay Under IRC 6163.

  2. An estate will be allowed an automatic 6-month extension of time to file Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, if Form 4768, Application for Extension of Time To File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes, is filed on or before the due date for filing Form 706.

  3. Basics:

    1. An estate tax return is due 9 months after the date of death.

    2. Form 4768 should be used to request the extension, and sent to the Internal Revenue Service office where the return is required to be filed.

    3. The extension of time to file may be granted for a period not to exceed 6 months from the due date of the return (12 months if the executor is living out of the country or out of the country for an extended period).

    4. To avoid assessment of failure to file penalties, a return must be filed as accurately as possible before the extension date expires.

    5. An extension of time for filing the estate tax return does not allow for an extension of time for payment of any estate tax due.

    6. An extension of time to pay may be granted up to 12 months per request. Generally, the same length of time is given as the extension to file making it reasonable to expect the executor will know the tax liability and liquidity of assets by the end of the six month period. When the extension to file and pay dates match, IDRS will systemically process the account.

    Note:

    An extension of time to pay (under IRC 6161) is not automatically granted.

  4. A request for an automatic extension of time to file will be disapproved if any of the following conditions are met:

    • Form 4768 was received after the return due date (including grace period), or

    • Form 4768 is not signed.

      Note:

      Send Letter 5989, Form 4768 Missing Information, to correspond for missing information.

    For additional information on extension of time to file or pay estate tax returns, see IRM 5.5.5, Processing Estate and Gift Tax Accounts.

Batching and Assigning Extensions
  1. All Forms 4768 must be date stamped upon receipt, sorted by type, and batched.

  2. Clerks will sort and batch extension requests as follows by looking at Form 4768, Part IV Line 3:

    • Extensions reflecting money

    • Extensions reflecting no money (balance due)

  3. Extensions will be batched and assigned upon receipt. Each batch will be:

    • Numbered and contain up to 20 documents

    • Entered on the spreadsheet reflecting the date, batch number, and volume

  4. Timeframes to Complete Batched Work - Complete all work within the following response times from E&G received date:

    • Extensions to File and/or pay with no payment will be approved or denied within 14 calendar days (30 calendar days during filing season February-April)

    • Extension to Pay reflecting money owed - 1 calendar day (3 calendar days during filing season February to April)

    Note:

    Per IRS Regulations, the application will be examined and within 30 days, if possible, will be denied, granted, or tentatively granted subject to certain conditions of which the taxpayer will be notified.

  5. Assignment of Work - Before distributing the extensions to the employees, the managers will maintain a spreadsheet to track the following:

    1. Number of extensions per batch,

    2. Batch number, and

    3. Name of the employee being assigned to.

    Upon completion of an extension batch, the batch sheet and extensions will be returned to the team manager. The manager will count and verify the number of extensions and maintain the total extensions worked on the team inventory report.

Extension Procedures
  1. Standard Procedures for all Extensions to File and/or Pay:

    • All extensions must be screened for accuracy.

    • The entity must be established on IDRS before the extension can be processed.

    • Specific transactions must be input on IDRS to reflect the appropriate outcome.

    • Extensions to pay and denied extensions to file must be added to the extension database.

  2. Screening - All Forms 4768 will be screened as follows:

    • Verify the form is timely filed

    • Verify signature

    • Verify SSN

    • Verify Date of Death

    • Check for cash shortage (reference IRM 5.5.5.3, Processing Responsibility of Forms 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes). Follow up on indications of payment to ensure posting before determining a cash shortage.

    Additional Screening for International Extensions:

    • Check that entity is established,

    • If entity not established, research IDRS with command codes NAMEE/NAMEI for a SSN or a previously filed IRSN.

    • If no SSN or IRSN found, obtain IRSN by preparing Form 9956, Request for Temporary IRSN and E-Fax to Entity at ≡ ≡ ≡ ≡ ≡ ≡ , with a copy of page one of Form 4768. Entity will E-Fax the assigned IRSN for the estate. Correspond with Estate informing them that an IRSN has been assigned for the estate to use for filing Form 706-NA and all other correspondence.

    Extensions to File that meet the above screening criteria can be processed. For IDRS input see IRM 4.25.2.4.2.4, Allowing and Denying Extensions. For timeframes to complete extensions see IRM 4.25.2.4.2.1 (4), Timeframes to Complete Batched Work.

  3. International Extensions to File:

    • Grant six months extension if the estate does not specify a length of time for the extension.

    • Grant an additional six month extension if the estate correspondence advises the executor is out of the country and is requested before the expiration of the extended due date.

    • Verify that a statement is attached explaining in detail why the Form 706-NA cannot be filed by the due date.

    Note:

    Do not assume that because the executor has a foreign address, they live out of the country for more than 6 months.

    Note:

    The Service may, upon the showing of good and sufficient cause, grant an extension of time to file the return.

    Note:

    Failure to file an extension request timely may indicate negligence and constitute sufficient cause for denial.

Extension to Pay Sent to Advisory Estate Tax Lien Group for Processing
  1. Applications that meet the criteria below must be sent to the Advisory Estate Tax Lien (ETL) group for consideration. Due to the 30-day period to reply to the taxpayer on their application, the applications and attachments must be e-faxed to Advisory ETL group within 3 business days of assignment to a tax examiner.

    • All requests for extension to file and pay involving unfiled tax returns in which the estate anticipates a cash shortage to pay taxes that will become due ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ will be sent to Advisory ETL group for approval consideration.

    • Extension requests on unfiled returns, where the estate sends payment of the estimated liability with the request (payment and estimated tax are equal), will not be sent to Advisory ETL group; requests where the estimated tax is not paid will be sent to Advisory ETL group if the estimated liability ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    • All requests for extensions to pay on accounts in which the tax return has been filed and reflect a balance due ≡ ≡ ≡ ≡ ≡ ≡ ≡ will be sent to Advisory ETL group.

    • All extensions to pay where it is the third request, regardless of the dollar amount, will be sent to Advisory ETL group.

    • All requests for extension of time to pay annual installments that are deferred under IRC 6166 will be sent to Advisory ETL group.

    All other requests that do not meet the above criteria will be processed by the E&G Tax Team of Cincinnati Compliance Services.

  2. Forwarding Extension to Pay to Estate Tax Lien Group:

    • Campus E&G teams will work Form 4768 extensions within one day.

    • All extensions to pay (ETP) meeting Advisory ETL group criteria will be assigned to a TE and controlled on the extension database.

    • The extension to pay will be e-faxed daily to Advisory ETL group. Send Letter 5986, Form 4768 Sent to Advisory ETL group, to executor/POA.

    • The Advisory ETL group e-fax number is ≡ ≡ ≡ ≡ ≡ ≡ .

    • Each Form 4768 and attached correspondence will be e-faxed with a separate two-way transmittal, notating the name and e-fax number of the sender (TE).

    • The TE will schedule a follow up in the extension database for 45 days from the date the Form 4768 was e-faxed to Advisory ETL group. If after 45 days a response has not been received from Advisory ETL group, the TE will contact Advisory ETL group to inquire who the Form 4768 is assigned to and status of the Form 4768 request. A new follow up date should be noted in the extension database.

    • The same day ETP is closed, Advisory ETL group will send a copy of the letter mailed to the taxpayer and page two of the Form 4768 to the examiner listed on the transmittal by e-fax. The E&G examiner will input the TC 468 on IDRS and update the extension database within three days of Advisory ETL group’s response.

    • E&G managers will monitor the extension database to ensure timeframes are met.

    • When the account is full paid and AIMS is closed, the campus will associate the closed extension file with the Form 706 tax return.

    Note:

    Always use the date Advisory ETL group provides.

IRC 6161 Extension of Time to Pay
  1. A request for extension to pay can be made for:

    • The amount owed with the original return, or

    • An audit assessment, or

    • An IRC 6166 annual installment amount due.

  2. All extension to pay request are entered into the extension database.

  3. Any extension to pay request that doesn’t have an accepted reasonable cause statement will be allowed an additional fifteen (15) calendar days to provide this statement.

  4. The employee reviewing the extension to pay request will:

    • Send Letter 5989, Form 4768 Missing Information, to the executor requesting the additional information needed, and

    • Document the extended time allowed in the case history.

    If the estate does not provide a timely response, the request will be denied.

  5. International Extensions to Pay:

    • Generally the same length of time is given as the extension to file, making it reasonable to expect the executor will know the tax liability and liquidity of assets by the end of the six month period.

    • Allow twelve months due to the executor being out of the country if it was granted for the extension to file.

  6. For additional information concerning extension of time to pay estate tax see:

    • IRM 5.5.5.1, Section Overview Request for Extension of Time to Pay Estate Tax

    • IRM 5.5.5.3, Processing Responsibility of Forms 4768, Application for Extensions of Time to File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes

    • IRM 5.5.5.4, Evaluating Requests for Extension of Time to Pay

    • IRM 5.5.5.7, Approval of Requests for Extension of Time to Pay

  7. The table below shows the IDRS command codes and the actions to take for researching extensions and establishing the entity if needed.

    COMMAND CODE (CC) ACTION TO TAKE
    INOLES XXX-XX-XXXX Verify the Date of Death (DOD), then
    INOLES XXX-XX-XXXXV Verify if account is on ENMOD, then
    ENMOD XXX-XX-XXXXV Verify information is correct including DOD. If not on ENMOD, establish entity with TC 000. See IRM 3.13.5.115, Establishing a New Account. Overlay ENMOD with ENREQ and press enter, then input the information on ENREQ (mailing information), then
    BNCHG will appear

    Note:

    Information entered on this screen should be in all CAPS.

    Enter TC (Transaction Code)
    Enter NEW-NAME-CTRL (New Name Control)
    Enter PRIMARY-NAME (Name of Estate)
    Enter SORT-NAME (Name of Executor)
    Enter Street Address, City, State, Zip Code
    Enter MFT
    Enter (DT-OF-Death)
    Enter Remarks (Example: Per Form 4768), then
    MFREQ Use MFREQ if corrections are needed as follows:
    MFREQC SSN
    00*000000*Name Control (* equals space), then
    BMFOLI If tax period in not on BMFOLI, then enter MFREQ. This will create a dummy account only after TC 000 is on account, then
    TXMOD XXX-XX-XXXXV

    Note:

    Verify that payment date and Form 4768 IRS received date are the same. If not, correct the TC 670 payment date.

    This will bring up the dummy account, then
    Enter REQ 77, then
    Enter TC 46X, then
    EXTENSION-DT (enter extension date), then
    At the bottom input: NSD approved extension (mailing the information what needs to be input).

    Note:

    The date of death must be present on the IDRS account to prevent an unpostable.

  8. Allowing and Denying Extensions: The IF/THEN table below shows the extension processing inputs for IDRS Command Code REQ77.

    IF THEN
    Allowing extension to file Input TC 460 with approved extension date.
    Monitor for TC 460 to post.
    Allowing extension to pay
    1. Input TC 468 with approved extension date.

    2. Send to the estate a completed and Director signed copy of Form 4768 page 2 if campus approved extension.

    Denying extension to file
    1. Input TC 460 with the following:

      1. The original return due date, or

      2. The previously approved extension date (whichever is later).

      3. After completing (a) or (b), type “Denied” at the end of the data on the screen.

    2. Prepare and send Letter 297C, Extension of Time to File and/or Pay (IMF/BMF); Denial Explanation, with the following:

      1. Advise the taxpayer of the extension denial, and

      2. Insert the appropriate paragraphs in the explanation.

    3. Input on the extension database including the received date and the reason for denial. Destroy extension to file after one year from the denied TC 460 date.

    4. Notate the TC 460 date on the top of the Form 4768 and place in appropriate receptacle.

    Denying extension to pay
    1. Input TC 468 with the return due date to indicate the extension was denied for the first request.

    2. If the original extension to pay is denied and subsequent extension to pay requests are denied, input TC 468 using the original due date of the estate return and the correct closing code.

    3. If any prior extension to pay requests were previously approved, then use the last approved extension to pay request date.

    4. Prepare and send Letter 297C with the following:

      1. Advise the estate of the extension denial by enclosing a completed and Director signed Form 4768 page 2.

      2. Insert the appropriate paragraphs in the explanation, and

      3. Notify the taxpayer of their Appeal rights.

    5. Form 4768 instructions state that a written appeal may be made by registered or certified mail to the IRS official shown on the Letter 297C within 10 days after the extension denial is mailed to the executor.

    Note:

    If Advisory ETL group denies the extension, do not send Letter 297C. Advisory ETL group sends a letter.

    Note:

    For additional information on IDRS CC REQ77, See IRM 2.4.19, Command Codes REQ77, FRM77 and FRM7A, Exhibit 2.4.19-2, Command Code REQ77 Response.

    Note:

    Refer to Document 6209, IRS Processing Codes and Information.http://serp.enterprise.irs.gov/databases/irm.dr/current/6209/6209.html, for the appropriate closing codes.

    Note:

    For additional information on denied extension requests for time to pay, see IRM 5.5.5.8, Denial of Requests for Extension of Time to Pay.

  9. Tax on Return - An extension request to pay is made on Form 4768 and should contain a detailed written statement explaining why the estate can’t pay the full amount of tax by the return due date.

    1. In lieu of filing Form 4768, the application for extension of time to pay shall be in writing, state the period of extension requested, and include a declaration that it is made under a penalty of perjury.

    2. Any extension for time to pay will not be considered by the Service unless the extension is applied for on or before the date fixed for payment of tax.

    Note:

    For additional information refer to IRM 5.5.5.4, Evaluating Requests for Extensions of Time to Pay.

  10. Tax on Deficiency:

    1. The extension to pay request may be made on Form 4768 or by letter. The request must show there is reasonable cause to extend the payment date. Verify that the statement of reasonable cause is attached.

    2. The extension for time to pay may be granted for a period not to exceed 4 years from the date fixed for payment of the deficiency, for up to one year at a time.

    3. To be considered, the extension application must be filed on or before the date fixed for payment of the deficiency billed.

    4. The extension shall not be granted if the deficiency is due to negligence, or intentional disregard of rules and regulations, or fraud with intent to evade tax.

    5. Extensions with a cash shortage ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ are sent to Advisory ETL group.

  11. IRC 6166 Annual Installments:

    1. The extension for time to pay must be filed on or before the due date of the annual installment to be considered.

    2. The procedures for processing annual installment extensions are similar to procedures for processing IRC Section 6161(a)(2)(A) extensions. The main difference is interest and penalty amounts are computed on the unpaid installment amount instead of the unpaid total tax due.

    3. ALL extension requests for IRC 6166 annual installments are sent to Advisory ETL group for consideration.

    For additional information see IRM 5.5.5.5, Requests for Extension to Pay Tax Deferred under IRC 6166.

  12. Reasonable Cause - See IRM 5.5.5.4, Evaluating Requests for Extension of Time to Pay.

  13. Case Monitoring:

    • If the initial extension to pay date is different from the initial extension to file date, a case file must be set up and manually maintained for any future actions such as interest, penalty adjustments and manual billing.

    Note:

    If the initial extension to file date and the initial extension to pay date are the same, monitoring is not needed. The computer will assess any interest and/or penalties due. Subsequent extensions to pay do not need to be monitored unless the tax module updates to status 14.

  14. The table below shows the steps for monitoring extension cases with different extension to file and pay dates:

    IF: THEN:
    TC 150 posts with no tax liability or the liability is full paid by the file and pay extended date
    1. No further action is necessary.

    2. Close the case file.

    TC 150 posts with a balance due on the account and the date to pay has expired
    1. Research IDRS for potential misapplied payments.

    2. Compute interest from return due date to the 23c date, considering any payments on the account.

    3. Input TC 340 for unassessed interest and a Hold Code zero (0).

    4. Compute Failure to Pay (FTP) penalty from the extended payment date to the 23c date and input on IDRS with a TC 270 and a Hold Code zero (0).

    5. Input TC 489 on IDRS to terminate the deferred status.

  15. A subsequent additional extension of time in which to pay may be granted for reasonable cause per Treas. Reg Section 20.6161-1(a)(1). The following actions are needed:

    • Extension should be to a stated date on the Form 4768.

    • File should be notated and transferred to the IRC 6161 file.

    • File should be filed chronologically by the new date, and

    • Attach a copy of the document granting the additional extension.

  16. If notification of denial is received from the Advisory ETL group, compute penalty from the payment due date to the date of payment or to the date of Notice and Demand. Input TC 270 on IDRS.

  17. If extension is terminated, input TC 489 to remove the account from the deferred status.

  18. Manual Billing - A manual billing is done on extension accounts that are in status 14. It may be necessary to cross-reference extended payment dates for billing purposes when the approved Form 4768 is received as follows:

    • Annotate the new extended payment date shown on Form 4768, Part III, and

    • Establish a filing system for the extension to pay cases in chronological order per the approved extension date.

    The manual billing process is initiated four weeks in advance of the extended payment date as follows:

    1. Compute interest at the existing rate from the return due date to the extended date, applying payments as necessary.

    2. Input TC 340 on IDRS to assess interest.

    3. Prepare and mail Letter 6335, Estate Installment Program, or Letter 2568C, Follow-up Letter for Installment Billing and Section 6161 Balance Due Billing: Form 706.

  19. Missing Payments: If an extension indicates a payment was sent (green rocker) but not on IDRS:

    Note:

    The green rocker will show amount of money received with a return or extension.

    • Input on extension database the Form 4768 data and a history item of what the green rocker shows as a payment.

    • Check IDRS for payment.

    • Research RTR for payment.

    • If payment not found, contact estate representative to verify a payment was sent.

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , follow the criteria in IRM 4.25.2.4.2.3 (1). Send to Advisory ETL group (even if payment hasn’t posted), noting the amount of misapplied funds that will be moved to the account.

  20. CP-191 Payment Notification: When a payment is received, and posted to the account on BMF, a CP 191 Notice will generate (Code 2). For list of CP 191 codes and definition see IRM 4.25.2.4.1, Understanding Estate Accounts. The payment should include the tax amount in full and interest accrued from the due date of the return. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Input TC 340 on IDRS to assess additional interest, if applicable.

    Note:

    Do not enter a hold code with TC 340, when removing from deferred status 14.


    If CP 191 indicates the account is not paid in full:

    1. Research IDRS or NMF for potential misapplied payments and/or additional extensions of time to pay.

    2. If the extension has expired and no payments or additional extensions are found, compute interest from return due date to the 23C date, taking into consideration any payments made on the account. See IRM 20.2.10, Interest, Interest on Estate, Excise, Employment and Foreign Taxes, for computation of interest. Input TC 340 for any interest that has not yet been assessed and a hold code zero. Compute FTP penalty from the extended date of payment to the 23C date. Input TC 270 on IDRS to assess the penalty. Input TC 489 to terminate deferred status.

    3. When the penalty and interest transactions post on IDRS, a computer-generated notice will be issued to notify the taxpayer of the balance due. When CP 191 is received showing TC 270, TC 340, and TC 489 have posted, associate with the original Form 4768 case file and close the case. If an additional extension of time in which to pay was granted, change the extended payment date on the 4768 case file accordingly.

    4. Attach a copy of the document authorizing the additional extension and refile the case according to the new extended payment date.

  21. Taxpayer Extension Correspondence - Taxpayer correspondence may be received indicating that an extension under IRC Section 6161 was requested, but IDRS notices are still being sent to them.

    • Research account for TC 460/468.

    • Input STAUP for nine weeks to stop collection activity.

    • Check extension database. If extension is listed on the database, but not on IDRS, then update IDRS with TC 460/468.

    • If extension is not on IDRS or the database, request from the taxpayer a copy of the submitted Form 4768 and proof of timely mailing.

    • Once the extension is received with timely proof of mailing, see IRM 4.25.2.4.2.4 table for allowing and denying extensions.

  22. The IF/Then table below shows what action the TE should take for allowing and denying the timely filed extension.

    IF THEN
    The extension is allowed
    1. Research for Form 4768. See IRM 4.25.2.4.2.4, IRC 6161 Extension of Time to Pay.

    2. Input a TC 460/468 with approved extended date.

    3. Input on database and set monitor for TC 460/468 to post.

    Note:

    If extension to pay and file dates are the same, close the extension database file and retain Form 4768 to monitor for TC 150 to post.

    The extension is denied by campus See IRM 4.25.2.4.2.4, Allowing and Denying Extensions, for instructions on denying an extension.

    Note:

    Release STAUP and allow IDRS notices to generate.

    The extension is denied by Advisory ETL group
    1. Input TC 468 with the following:

      1. The original return due date, or

      2. The previously approved extension date (whichever is later).

      3. After completing (a) or (b), type “Denied” at the end of the data on the screen.

    2. Release STAUP and allow IDRS notices to generate.

    3. Associate file with original document (controlling DLN.)

  23. Retention:

    • Form 4768 is held for at least one year past the approved extension to pay date. If Master File indicates there is no liability on the account or the account is in Tax Delinquent Investigation (TDI) or Tax Delinquent Account (TDA) status, no further action is necessary.

    • If extension requests for time to pay under IRC Section 6161 have been appealed, denied by Advisory ETL group or there is a balance due on the account, follow instructions in the table above. See IRM 4.25.2.4.2.4, IRC 6161 Extension of Time to Pay. Associate the file with the original Form 706 document (controlling DLN.)

    • Form 4768 extension to file can be destroyed after the posting of the TC 460 and TXMOD history is documented.

Form 1127, Application for Extension to Pay Due to Undue Hardship
  1. An application for an extension of time to pay certain tax liabilities under IRC 6161 is made by timely filing Form 1127, Application for Extension of Time for Payment Due to Undue Hardship. The types of taxes for which an extension to pay requested on Form 1127 are listed in the instructions to the form. These include income taxes, gift taxes, and certain excise taxes.

  2. See IRM 5.1.12.26, Form 1127 Application for Extension to Pay Due to Financial Hardship, for additional information.

  3. The E&G unit will determine whether the application is processable in accordance with the guidelines provided in IRM 5.1.12.26, Form 1127 Application for Extension to Pay Due to Financial Hardship. Applications that are determined non-processable may be signed by the E&G unit manager and returned to the taxpayer along with a cover letter explaining why the application is non-processable. If it is determined that the application is processable, the following steps will be taken within seven calendar days of receipt:

    • Establish an entity under MFT 51.

    • Document the TXMOD history with the date the application was received and the date it was forwarded for consideration.

    • Forward the application and supporting documents to the Advisory ETL Group.

    • Monitor the account for the approved application, reverse the TC 470 when necessary, and abate the FTP penalty if assessed for the period the extension was granted.

    • Associate a copy of the application and the cover letter sent to the taxpayer with the related Form 709 tax return.

  4. Applications from the Advisory ETL Group:

    • Denied applications from the Advisory ETL Group will include copies of the denied application and the cover letter sent to the taxpayer. Document the TXMOD history that the extension request was denied.

    • Approved applications from the Advisory ETL Group will include copies of the approved application, cover letter sent to the taxpayer, and a Form 4844, Request for Terminal Action, requesting the E&G unit to input a TC 470, no closing code, for the appropriate number of cycles, and a TC 270 for $0.00. Document the TXMOD history that the extension request was approved and the new extension date.

Estate Tax Extension of Time to Pay Under IRC 6163
  1. See IRM 4.25.14.2.4, Estate Tax Extension of Time to Pay - IRC 6163, and IRM 4.25.11.11.5, Preparing Agreed Case with 6163 Election Case File for CCP, for additional information.

  2. General Information:

    • Field Exam analyzes the election and works with Advisory ETL group and Counsel to secure the bond. Counsel ensures that the language of the bond is sufficient.

    • Campus monitors the election case file and issues annual letter to estate to ensure that the condition precedent hadn’t been triggered.

    • Advisory ETL group stores the bond (like they do for other collateral agreements.) Once condition precedent is triggered, they start collection proceedings. Campus lets Advisory ETL group know that the condition was triggered and the freeze code expired.

  3. Campus Process - Prepare a folder notating the following:

    • Estate’s name, and

    • Received date of the return, and

    • Date request was referred to Field Exam.

    The folder will be placed in temporary suspense in front of other extensions granted under IRC Section 6163 and then do the following:

    1. Forward the request to Field Exam along with a copy of the return.

    2. Forward a copy of the return to Advisory ETL group with a note indicting an election under IRC Section 6163 by the estate.

    3. Approximately 90 days after the return received date, verify receipt of Form 2276, Collateral Deposit Record.

      Note:

      Collateral is equal to twice the amount of tax deferred under IRC Section 6163.

    4. If the collateral is on deposit with the Advisory ETL group, annotate case file "Form 2276 Received reflecting collateral secured" and file by received date in a separate IRC Section 6163 folder.

    5. Put on extension database with notation 6163 extension with annual follow-up date.

    6. Input TC 488.

    7. Pending termination of the precedent interests (surviving heirs) at a future unknown date, no further collection or follow-up action is required other than annual letter. The file becomes essentially informational.

    8. If Form 2276 has not been received, contact the responsible Advisory ETL group to determine the required collateral status. If the Advisory ETL group did not receive the required collateral, advise the Revenue Officer and the taxpayer in writing that the election of an extension under IRC Section 6163 is not valid. Terminate the extension. Reverse the TC 488 with a TC 489 to remove the account from deferred status.

IRC 6166 Installments

  1. The following sections provide guidelines for processing IRC 6166 installments.

General Information
  1. Per IRC 6166(a)(1), an executor may elect to pay all or a portion of the estate tax attributable to a closely held business in two (2) or more equal annual installments.

    Note:

    No more than 10 annual installments are allowed.

  2. To qualify for annual installments:

    1. Decedent was a citizen or resident of the United States on the date of death.

    2. The value of the decedent’s interest in a closely held business must exceed 35 percent of the adjusted gross estate.

    3. A timely filed return including a timely IRC 6166 election request was filed.

  3. An interest in a closely held business is defined as:

    1. A proprietorship that carries on a trade or business.

    2. An interest in a partnership that carries on a trade or business. Deceased partner’s interest must be 20% or more of the total capital interest in the partnership or the partnership has 45 or fewer partners.

    3. Stock in a corporation carrying on a trade or business if 20% or more of the value of voting stock of the corporation is included in the gross estate or the corporation has 45 or fewer shareholders.

  4. Deferred tax is the amount of estate tax owed that is applicable to a closely held business if the installment request is approved.

  5. Non-deferred tax is all other tax owed on the balance of the estate.

    Note:

    An estate can have more than one closely held business and can request an installment arrangement on all closely held businesses.

  6. Estates with approved IRC 6166 installment, must certify each year that the assets associated with the closely held business are intact, or explain the changes, to ensure the qualification for installment still exists. This is called a Certification of Unchanged Status. This certification is sent with the annual bill and must be signed under penalty of perjury.

  7. Monitor for TC 150 and status 14. If account is not in status 14, input TC 488 provided the TC 150 posted.

How IRC 6166 Installments are Received
  1. Installment elections or requests are filed with the original Form 706. The return with the installment election is referred from Submission Processing to E&G to ensure prompt processing of the requested installment before the return is processed.

  2. Occasionally, Submission Processing fails to refer installment requests to E&G. These are known as missed elections. Missed elections are found through the following:

    • Taxpayer correspondence, or

    • Generated CP 191, or

    • Classification of the return

  3. In addition to the pre-and post-processing of installment requests, installments are received from the field due to an audit adjustment.

  4. Submission Processing identifies IRC 6166 installment requests:

    • On Form 706, Part 3, Number 3, if the Section 6166 box is checked “yes” for installments, Code and Edit codes the return and rejects to Error Resolution System (ERS).

    • ERS sends the Form 706 to E&G for set up before processing of the return is completed.

IRC 6166 Installment Process - Clerical
  1. The clerk assigns IRC 6166 installment set-ups to the teams using the employee assignment listing.

  2. The Form 706 is entered on spreadsheet including the date received, date received from ERS or the date notified of a missed 6166 election set up and the team the case is assigned to.

  3. If the return is from ERS, the case is sent to the team manager with a Form 3210, transmittal, indicating the due date to send back to clerk.

  4. If the Form 706 is a missed installment set up, it is not returned to the clerk. The tax examiner will set up the case file and then forward to the TTT for classification.

  5. There is a ten-day turn around (two work weeks) for returning Form 706 to processing. The clerk gives the TE two weeks to return on transmittal.

IRC 6166 Installment Process - Tax Examiner
  1. The following must be verified for an estate to qualify for an IRC 6166 installment:

    • Timely filing of Form 706 estate return and IRC 6166 installment election request.

    • Decedent was a United States citizen or resident on the date of death.

    • Value of interest in closely held business must meet or exceed 35% of the adjusted gross estate.

    • SSN on Form 706 belongs to the decedent.

    • DOD on INOLE.

    • POA on CFINK.

      Note:

      If POA not on file, fax signed Form 706 pages one and two or Form 2848 to the appropriate CAF unit as found in Form 2848 instructions.

Review of IRC 6166 Election
  1. Review the IRC 6166 election. This election must be made with a timely filed Form 706. A statement must be attached to the Form 706 with computations indicating the deferred tax, non-deferred tax and the value of the closely held business amount with a list of the schedules showing the amounts of what makes up the closely held business.
    The above statement should include the following information:

    • Decedent’s name and SSN.

    • Amount of tax to be paid in installments.

    • Date selected for the first installment payment.

    • Number of annual installments in which the estate tax is to be paid. This includes the first installment payment.

    • Properties shown on the estate tax return which constitute the closely held business interest and are identified by schedule and item number.

    • Facts that formed the basis for the executor’s conclusion that the estate qualifies for estate tax installment payments.

      Note:

      See Treas. Reg. 20.6166–1(b), Time and Manner of Election, which provides information necessary for the Notice of Election.

  2. Non-deferred tax must be paid by the return due date unless the estate has an extension of time to pay under IRC 6161.

  3. Math verify the Form 706 by completing the Computation of Estate Tax Worksheet (Excel program located in the E&G common drive) to verify tax computation per return. If there is a math error, correct in red ink on return.

  4. Prepare Form 4349 and verify computation matches IRC 6166 election statement. If there is a difference of more than $1,000.00, notify POA.

  5. Verify that Penalty and Interest Code (PIC) is 1 on Form 706. If incorrect or missing, correct in red ink.

  6. Check for all executor(s) listed. Valid executor(s) are required to sign with an original signature under jurat statement.

IDRS Research
  1. Research IRC 6166 installment for correctness. Verify the IDRS information is the same as the information on the Form 706 by using IDRS CC INOLES to check decedent’s SSN, name and date of death.

  2. If the decedent’s information is not on file, establish the entity using CC ENREQ.

  3. If the decedent’s information is on file, verify that the entity information is the same as Form 706: decedent’s name, SSN, executor’s name and address, city, state, zip code.

  4. IDRS CC CFINK is used to research the CAF system for authorization information from both power of attorney and tax information authorization. The following table provides guidance researching the POA:

    IF: THEN:
    Power of Attorney (POA) is on file:
    1. The information is the same

    2. The information is different

    3. No signed representative is listed on page 2 of Form 706

    Verify the name and address is the same on file as on page 2 of Form 706.
    1. No additional action is required now.

    2. Fax copies of pages 1 and 2 of the signed Form 706 to the appropriate CAF unit.

    3. No further verification of POA is required.

    No POA on CFINK file and:
    1. There is a signed representative on page 2 of Form 706.

    2. There is either no representative listed or no signature for the representative on page 2 of Form 706.

     
    1. Follow procedures in 2 above.

    2. No additional action is needed.

    Form 2848 is enclosed with the Form 706:
    1. The information is the same

    2. The information is different

    3. The signed representative listed on page 2 of Form 706 is the same as the Form 2848 on CFINK file

    Verify the name and address is the same as the POA on file and on page 2 of Form 706:
    1. No additional action is required now.

    2. Fax a copy, whichever is different, either the Form 2848 or pages 1 and 2 of Form 706 to the appropriate CAF unit.

    3. No further verification of the POA is necessary.

    Any of the POA information is incorrect or missing. Contact the POA or the executor.
Case Establishment
  1. After initial IDRS research, input case on installment database regardless if denied or accepted.

    Note:

    Executor phone numbers are extremely important and if provided must be notated on the installment database.

  2. Prepare case file with copies of:

    • First three pages of Form 706.

    • Any schedules the closely held business refers to

    • Schedules J, K & L

    • All Schedules with money amounts on them

    • Form 4349

    • IRC 6166 spreadsheet from installment database

    • Letter 2568, tentative bill

    • Copy of IRC 6166 election statement

  3. List on outside of folder decedent name, SSN and return due date. Send folder with return to TTT for review. Notate installment database.

  4. When the case is received back from TTT, mail Letter 2568. It is not necessary to wait for TC 150 to post. Give the return to the clerk to send to ERS for processing. Monitor for TC 150 and STAT 14 to post. If account is not in STAT 14 input TC 488, provided the TC 150 posted. File the folder in cabinet by due date and month.
    Reminder: All actions must be annotated in the database.

  5. The TTT reviews the IRC 6166 cases for accuracy of the Letter 2568, IRC 6166 election and Form 4349. They will update the installment database history and return to the TE. There is a three day turnaround time.

  6. MissedIRC 6166 Set Up: If the Form 706 is already posted, but received because of missed installment setup, verify and set up file as stated above. Send to TTT as technical referral stating needs to be classified. If selected, return will be sent to the WSD National Gatekeeper. If not selected, close off Aims with AMSOC.

Initial and Annual Billing
  1. The IRC 6166 installment bill is sent yearly. The first bill is sent 30 days prior to the due date as a reminder. The letter includes a certification request.

  2. A listing is generated from the Installment Database reflecting accounts to be billed for the month. The listing must be worked within that month’s time frame. Complete IDRS research. If not the first bill, then compute interest and applicable penalties.

  3. The first letter (reminder) is Letter 249, Installment or Interest Due/Current Status Requested or Explained: Form 706. Also send Notice 330, Change of Status of Estate Due to Disposition of Interest or Withdrawal of Funds from Business, or by Reason of Undistributed Income or Failure to make Payment.

    Note:

    First four years is interest only. Include the installment amount after year four.

  4. If payment is not received:

    • Second letter is Letter 6335, Estate Installment Program.

    • Third letter is Letter 6335-T, Final Notice for Payment of Estate Tax.

    • Fourth letter is Letter 950-H, 30 Day Letter - Intent to Terminate IRC 6166 Election.

    • Fifth letter is Letter 6335-F, Notice of IRC 6166 Denial or Termination.

  5. Billing Next 10 Years or Remaining Years: The steps for billing the next 10 years are the same as the first five years except the installment amount for the tax owed is included with the bill.

  6. Annual Billings:

    • Send Letter 249 from database.

    • Include certification of unchanged status and Notice 330.

    • Suspend for 45 days.

    • Monitor for payment.

    • Monitor for signed certification of unchanged status.

    • Update database when payment and certification of unchanged status are received.

  7. Follow the IF/THEN table below for payment and certification of unchanged status:

    IF THEN
    Receive Payment and Certification Timely
    1. Update database.

    2. Update case file.

    Receive Payment Timely and No Certification

    Note:

    Lack of certification process requires one notification to be sent to obtain the certification. If certification is not received, the estate no longer qualifies for the IRC 6166 election. Research IDRS Entity to determine if the closely held business is still operating and filing returns. If no longer in business, accelerate the account. If still in business, send one more request for certification. If not received, accelerate the account.

    1. Call the Executor or POA requesting a faxed copy of the certification.

    2. If copy of certification is not faxed within three days, send a certified Letter 249 letter requesting the certification, to the executor and authorized POA.

    3. Suspend case 45 days waiting for certification.

    Receive Partial Payment with Extension Request & Certification
    1. Update case file.

    2. Update database.

    3. Send extension request to Advisory ETL group for approval. Notate IRC 6166 on request. See IRM 4.25.2.4.2.3 (2), Extension to Pay Sent to Advisory Estate Lien Group for Processing, for sending requests to Advisory ETL group.

    4. Monitor for Advisory ETL group’s response.

    5. If Advisory ETL group does not reply within 45 days, then contact Advisory ETL group for status.

    6. Advisory ETL group approves/disapproves & sends letter.

    7. If approved, input TC 468 on IDRS with the approved extension date, notate case file and refile case.

    8. If disapproved, follow Advisory ETL group’s instructions. Input TC 468 on IDRS with the last approved extension date or if first request, the return due date.

    Receive Partial Payment with Certification and Without Extension
    1. Send second bill.

    2. Compute statutory interest and FTP tax penalty.

    3. Prepare and mail new bill using 6335 Letter.

    4. Input penalty and interest on IDRS. See IRM 4.25.2.4.3.8 (9), Initial and Annual Billing.

    5. Update database.

    6. Monitor for payment.

      Note:

      Option to place courtesy call to POA requesting extension if not past the payment due date.

    Receive Partial Payment with Extension, No Certification
    1. Forward extension to Advisory ETL group for approval and note the certification of unchanged status was not received.

    2. Call POA requesting a faxed copy of the certification.

    3. If copy of certification isn’t faxed, send a certified letter requesting the certification.

    4. Suspend case 45 days waiting for response from Advisory ETL group and certification.

    5. If Advisory ETL group approves, file case.

    6. If Advisory ETL group denies, follow their instructions.

    No Payment/Partial Payment and No Certification Received

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡


    Second Notice: Letter 6335
    Third Notice: Letter 6335-F
    Fourth Notice: Letter 950-H (includes Appeal Rights).

    Note:

    If the estate requests additional time, an E&G manager can approve up to 30 days.

    1. Search IDRS for potential misapplied payment or Form 4768 extension request.

    2. Compute statutory interest.

    3. Compute FTP penalty.

    4. Compute Late Installment (LI) penalty.

    5. Prepare and mail new bill using appropriate letter.

    6. Input penalty and interest on IDRS. See IRM 4.25.2.4.3.8 (9), Initial and Annual Billing.

    7. Update database.

    8. Suspend case for 45 days and monitor for payment and certification.

    9. If third notice, send copy of Letter 6335-F to Advisory ETL group on a Form 3210 transmittal. Suspend for 45 days.

  8. For estate appeal rights, See IRM 4.25.2.4.3.10, Estate Appeal Rights.

  9. IDRS Input: Assess Interest on TXMOD:

    • TC 290 for .00

    • TC 340 interest amount

    • BLK 10

    • Hold Code 3 (hold notice since a manual bill is sent)

    • Interest-to-Date (Installment due date)

    • NSD Comment what is being assessed

  10. Accelerated Inputs on TXMOD:

    • TC 270 for .00

    • TC 340 interest amount

    • BLK 10

    • Hold Code 0

    • Interest-to-Date (Installment due date)

    • NSD Comment what is being assessed

    • TC 489

    • TC 241 to reverse LI, if applicable

  11. Monitoring: See IRM 4.25.2.6.2 (6), Reports.

Payments
  1. Payments should be applied in the following order:

    1. Non-Deferred Tax

    2. Deferred Tax

    3. Fees

    4. Penalties

    5. Interest

    Note:

    This order applies to all payments unless the taxpayer specifies in writing how the payments are applied.

  2. Payments made with the original filed return are applied to non-deferred tax. Occasionally an estate will overpay the non-deferred tax. The amount paid that is greater than the amount of non-deferred tax due is referred to as an “overpayment” or “interim” payment. These payments reduce interest but are not applied to interest billed in the first four years. The estate must pay the full amount of interest and penalty, if applicable, unless an election to apply the interim payment is made.

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    6. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    7. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Note:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. Additional Considerations:

    • Interim payments are held and applied to the first installment of tax. (Exception: If Executor/POA writes in requesting overpayment be applied to interest)

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • If the installment is not paid in full and an extension to pay is not filed, then additional notices are required. See IRM 4.25.2.4.3.8 (4), Initial and Annual Billing, for list of notices.

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • Reminder: The estate may elect to apply the interim payment to interest first.

    Note:

    Reference to overpayment or interim payment for E&G purposes refers to any payment over and above required to be paid at a given point in time.

Estate Appeal Rights
  1. Estate Appeal Rights: The Letter 950-H, Preliminary Section 6166 Determination Letter, provides the estate a 30-day period to appeal the termination of the installment. If an appeal is not made within the 30-day period, or as extended, or if the estate sends an untimely post-marked protest, the Letter 950-H becomes a final determination letter.

  2. If the estate fails to appeal the Letter 950-H within the 30 day period, prepare and issue Letter 6335-F, Notice and Demand for Payment of Entire Estate Tax Liability. Letter 6335-F shall be mailed certified mail, return receipt requested. See certified mail IRM 4.25.2.4.3.11 (2), Installment Denial Procedures. The Letter 6335-F shall reflect the account balance, less the LI penalty, plus the revised delinquent interest, plus any additional penalty and interest as of the 23c date. Send a copy of Letter 6335-F to the Advisory ETL group.

    1. Abate the LI penalty (TC 241) that is associated with this delinquent period (LI penalty is not applicable for accounts that are accelerated). Do not abate TC 240 with reference code. These have been input by other functions.

    2. Recompute the statutory interest on the past due installment from the last installment due date, adding any applicable FTP penalties as they were assessed to determine the correct interest now due, to the 23C date. (The previously assessed delinquent interest amount associated with this delinquent period will need to be subtracted from the recomputed amount.) Compute additional IRC 6166 interest up to the termination date (the 23c date). Combine the IRC 6166 interest and statutory interest amounts together and assess. Compute and assess FTP penalties as applicable, on the unpaid tax on the prior delinquent amount. See IRM 4.25.2.4.3.8 (9), IDRS Input.

    3. Monitor the account for the adjustments to post and status 21. The Letter 6335-F shall be dated and mailed on the 23c date. When the account goes to status 21, accelerate the account to status 26 using CC ASGNB with assignment code 6466. Close case.

  3. If the estate provides a written protest in response to the Letter 950-H, review the estate’s protest. If the service agrees with the estate and the payment has been received, continue the IRC 6166 election.

  4. If after reviewing the protest letter, E&G campus still believes the estates’ election should be terminated, prepare and send to Appeals within 30 days from the postmark date of the protest letter an auxiliary file containing the following:

    1. Copy of pages 1, 2, and 3 of the Form 706 and the schedules related to the closely-held business,

    2. Notice of IRC section 6166 election and attachments,

    3. Form 4349,

    4. Copy of Letter 2568C, Follow-up Letter for Installment Billing: Form 706,

    5. Any Form 4768,

    6. All correspondence between the Service and the Taxpayer related to the last year,

    7. Case history,

    8. Certification of Unchanged Status for previous year,

    9. Letter 950-H,

    10. All prior bills related to this year,

    11. Protest from taxpayer,

    12. Power of Attorney information.

  5. Transfer the auxiliary file for review to the Office of Appeals for the state of the decedent’s last domicile using the case routing list on the Appeal’s website, http://appeals.web.irs.gov/, with the understanding the case may be transferred to another Appeals Office based on inventory needs. Prepare Form 3210 forwarding case to Office of Appeals notating "Type of Case IRC section 6166 Termination for Failure to Pay. This is an emerging issue. Please check the Appeals Technical Guidance issue locator on the Appeals webpage for further information."

  6. Input history item on IDRS that indicates the protest has been sent to Appeals.

  7. Prepare a Form 3210 to Advisory ETL group notating that the case is being sent to Appeals and attach a copy of the protest and forward to the appropriate Advisory ETL group. The Form 3210 is for informational purposes only. Place copy of the Form 3210 in the case folder.

Installment Denial Procedures
  1. To deny the installment:

    • Accelerate after third billing.

    • Send Letter 6335-F, (final bill) fourth notice. Send copy of Letter 6335-F to Advisory ETL group.

    • Stop the acceleration process if the installment payment is received at any point in time.

    • Follow up in 45 days for first and second notices.

  2. Certified Mail : PS Form 3800, U.S. Postal Service Certified Mail Receipt and PS Form 3811, Domestic Return Receipt (green card) are required for sending certified mail.

  3. The PS Form 3800 has a Certified Mail Number (CMN), used to track the certified mail. The right side of the form is the delivery information. Complete name in the “sent to” information at the bottom, detach and keep in case file. The left side contains the CMN. Attach this portion to the envelope of the Letter 6335, Letter 6335-T, Letter 6335-F or Letter 950-H. Attach midway on the envelope, with the dotted line at the top of the envelope and the top green area overlapping on the back of the envelope. For Letter 6335 on the database, input the CMN under Executor and Power of Attorney Information. Since Letter 6335-T, Letter 6335-F and Letter 950-H are not on the database, input the CMN on the Account History along with an explanation of the type of letter sent. (i.e., sent 950H, CMN number.)

    Note:

    A separate Certified Mail Receipt must be completed and attached to letters to all executors and POAs.

  4. PS Form 3811 is proof of receipt. Complete both sides of the form and attach to the back of the envelope. The database is set up for printing the PS Form 3811 instead of handwriting it.

Computing Interest and Penalties:
  1. Interest is always accruing on any tax, penalties or interest due except when the Form 890, Waiver of Restriction on Assessments & Collection of Deficiency & Acceptance of Overassessments, is signed and notice and demand is not issued within the 30-day period.

  2. When computing interest and penalties, you need to address if interim payment(s) is received. Manually compute the interest. Follow the pro-rating instructions, if applicable.

    Note:

    When computing interest, pick up the dates of the different payments. If a lien fee is assessed during the year, add to the next IRC 6166 billing. The lien fee should not be included in the interest computation.

  3. The following is an IF/THEN Table for the interest percentages used in computing interest:

    IF THEN
    The date of death is prior to 1998

    Note:

    There should not be any cases meeting this criterion now.

    1. Interest is computed on deferred amount at 4% up to the allowable amount using COMPA 4, and

    2. The balance of tax is computed at the statutory rate set by Congress using COMPA D.

    The date of death is 1998 or later, or if the estate chose to opt out to the Taxpayer Relief Act of 1997.

    Note:

    For the estates of decedents dying before 01/01/1998, the executor of the estate may have made an irrevocable election provided for in IRC 6166 section 503(d)(2) of the Taxpayer Relief Act of 1997. The 2% interest rate applies to amounts that qualified for 4% under the old law.

    Note:

    Statutory interest rates may be adjusted quarterly by Congress.

    1. Interest is computed on the deferred amount at 2% up to the allowable amount as reflected in Exhibit 4.25.2-1 using COMPA 2, and

    2. The balance of tax is computed at 45% of the statutory rate set by Congress using COMPA 5.

    3. Example:
      Statutory rate = 3% x 45% of statutory rate = 1.35%
      This is the interest rate to use to calculate the interest due on the balance of tax.

    The deferred tax is greater than the 2% or 4% allowable amount and
    • There is an overpayment on the account, or

    • It is after the four-year principal deferral period and principal payments have been made.

    1. Interest will need to be pro-rated.

    2. See Exhibit 4.25.2-2, Estates-Pro-Rate Interest with Overpayment, for interest pro-rated computation.

    Note:

    The allowable amount is established by DOD and is found in the Form 706 instructions. Exhibit 4.25.2-1 and Exhibit 4.25.2-2 provide examples of the interest computations.

  4. Penalties are assessed when the installment is not timely paid. There are two penalties that are applicable and are included on all notices after first notice:

    1. LI Penalty on the unpaid installment (principal and interest) at 5 percent per month (or fraction thereof) from the installment due date (considering any extension of time to pay) to the payment due date. Maximum penalty is 30% of the installment owed.

      Note:

      LI penalties cannot be abated for reasonable cause.

    2. FTP Penalty on the principal portion of the installment, from the installment due date (considering any extension of time to pay) to the payment due date.

  5. The following is an IF/THEN Table for Billing the First Five Years-Interest Only:

    IF THEN
    Deferred Tax with Non-Deferred Tax Full Paid
    1. Compute IRC 6166 interest (2% and 45% of statutory interest) on installment database (link to determining 2% and 45% of statutory interest section) and assess on IDRS. See IRM 4.25.2.4.3.8 (9) for the IDRS input to assess interest on TXMOD.

    2. Prepare and send Letter 249 from installment database.

    Non-Deferred Tax, Full Paid and Additional Interim Payment Submitted
    1. Complete steps a and b above.

    2. Prepare and send Letter 249 advising the estate, on first year notices only, that the payment will be held until the fifth year to be applied toward tax first.

    Balance Due on Deferred and Non-Deferred Tax with No Open Extension
    1. Compute FTP penalty on non-deferred tax.

    2. Compute Statutory (STAT) interest on non-deferred tax.

      Note:

      STAT interest is normal interest.

    3. Compute IRC 6166 interest (2% and 45% of STAT interest) on deferred tax.

    4. Combine interest for input purposes.

    5. Assess penalty and interest on IDRS. See IRM 4.25.2.4.3.8 (9)for the IDRS input to assess interest on TXMOD.

    6. Prepare and send Letter 6335.

    Interest Installment and Non-Deferred Tax is Unpaid Interest with Valid Open Extension
    1. Compute STAT interest on non-deferred tax and IRC 6166 interest (2% and 45% of STAT interest) on deferred tax.

    2. Combine interest for input purposes.

    3. Assess penalty and interest on IDRS. See IRM 4.25.2.4.3.8 (9) for the IDRS input to assess interest on TXMOD.

    4. Prepare and send Letter 6335.

  6. See IRM 20.2.10.2, Interest on Estate Tax Returns, for additional information.

  7. The campus will complete a full review of the interest calculations on all IRC 6166 cases every three years.

Voluntary Early Termination

  1. If the estate requests voluntary early terminationat any time, either via telephone or correspondence, send pattern letter, Waiver of Right to Administrative and Judicial Review of Termination of IRC 6166 Election, in IRM Exhibit 4.25.2-3. This letter requires managerial review, approval and signature. Establish a 30-day follow-up date to monitor for the taxpayer response. Document the database that the request for early termination was made, the letter was sent to the executor for signature and the follow up date. Should the next billing date arrive before receipt of the letter, continue normal billing procedures.

  2. The date of termination is the IRS received date of the signed Waiver of Right to Administrative and Judicial Review of Termination of IRC 6166 Election.

  3. Upon receipt of the signed Waiver of Right to Administrative and Judicial Review of Termination of IRC 6166 Election, take the following actions:

    1. Begin termination procedures. Verify the person signing the early termination letter is the person/executor that has been receiving annual installment billings. The estate has no appeal rights once the letter is signed and received by the Service.

    2. Abate the LI penalty (TC 241) that is associated with this delinquent period (LI penalty is not applicable for accounts that are accelerated). Do not abate TC 240 with reference code. These have been input by other functions.

    3. Recompute the STAT interest on the past due installment from the last installment due date, adding any applicable FTP penalties as they were assessed to determine the correct interest now due, to the 23C date. (The previously assessed delinquent interest amount associated with this delinquent period will need to be subtracted from the recomputed amount.)

    • Compute additional IRC 6166 interest up to the termination date (the IRS received date of the signed letter, Waiver of Right to Administrative and Judicial Review of Termination of IRC 6166 Election).

    • Combine the IRC 6166 interest and STAT interest amounts together and assess.

    • Compute and assess FTP penalties as applicable, on the unpaid tax on the prior delinquent amount. TC 241, TC 270 and TC 340 use a Hold Code 0. Input TC 489 at the same time as the TC 241, TC 270 and TC 340 to terminate deferred status.

  4. Monitor the account for the adjustments to post and Status 21. Prepare and issue Letter 6335-F, Notice and Demand for Payment of Entire Estate Tax Liability. Letter 6335-F shall be dated and mailed certified mail, return receipt requested, on the 23c date. Do not check any boxes, attach a copy of the letter signed by the executor requesting early termination. Send the Letter 6335-F to the executor and the current POA on file.

  5. Send Advisory ETL group a copy of the letter agreement to voluntary early termination along with a copy of the Letter 6335-F.

  6. When the account goes to Status 21, accelerate the account to Status 26 using command code ASGNB with assignment code 6466. Close case. Associate all the correspondence related to the termination of the IRC 6166 election to the Form 706.

  7. If the estate decides not to voluntarily terminate the 6166 election, or if no response is received within 30 days, leave the account in status 14 and continue normal billing procedures.

Miscellaneous IRC Section 6166 Campus Termination Issues

  1. ) For various E&G campus termination issues, reference the following termination IF/THEN Table.

    IF THEN
    If the termination is the result of the sale, disposition of, distribution, or withdrawal of money from the closely-held business that is equal to or exceeds 50% percent of the closely-held business, The termination date is the date of the sale, disposition, distribution, or withdrawal of the interest.
    If the termination is the result of the failure to make installment payments of deferred tax, The termination date is the date the notice and demand for the entire estate tax liability has been sent to the taxpayer, typically the Letter 6335-F.
    If the termination is the result of the failure to provide security when the Service has determined that security is necessary, The termination date is the date 30 days from the date of the issuance of the Letter 950-I, 30 Day Letter - Intent to Terminate IRC 6166 Election.
    If the termination is the result of the estate voluntarily requesting an early termination, The termination date is the received date of the signed Waiver of Right to Administrative and Judicial Review of Termination of IRC 6166 Election.

Closed IRC 6166 Cases

  1. IRC 6166 cases are closed upon full payment, 14 years annual installment expiration and/or extension or default of the installment agreement.

  2. Closed IRC 6166 files should be associated with the refile or controlling DLN on the Form 706 account using Form 10023-B. Before associating with the file, any documents not needed to maintain the IRC 6166 file such as CPs, IDRS TXMOD, BMFOL etc. prints should be removed. Folders should also be removed. The closed IRC 6166 files no longer need to be held one year before sending to Files. Associate as the IRC 6166 is closed.

  3. Documents to be kept and associated with Form 706:

    • All correspondence with the estate

    • All letters 6335 including computations

    • All extensions to pay (needed to calculate CSED)

    The above list is not all inclusive. Only the items listed in paragraph (2) above should be removed from the file.

Lien Packages to Advisory

  1. Lien packages are prepared for IRC 6166 and IRC 2032A.

  2. Accepted Form 706 returns with either an IRC 2032A and/or IRC 6166 election are forwarded to E&G campus after classification. Elections for IRC 2032A are made in Part 3 of Form 706 page 2.

  3. The following guidelines are for preparing Lien Packages for Advisory ETL group.

  4. Verify the following:

    • Return is stamped accepted or surveyed; if not, return to originator for classification.

    • AIMS is updated to EGC 1070; if not update.

      Note:

      If there is a calculation issue, notate for Advisory ETL group.

  5. Calculate recapture tax amount as follows: the total in Column C plus the Total Gross Estate less exclusion amount less the original amount of total transfer tax.

    Note:

    If there was no tax liability on the original return and the new amount computed still results in no tax liability, then there is no recapture tax. Send the return to Files to have closing letter issued (if applicable) and for input of TC 421 to close database off AIMS/ERCS.

  6. Prepare Form 6111, Notice of Special-Use Valuation Election, (IRC 2032A).

  7. Prepare Memo to Advisory ETL group and attach the following documents:

    • Form 6111

    • Page 1, 2 and 3 of the Form 706

    • IRC 2032A election and attachments

    • Schedule A-1

    • Any schedules describing property used in the IRC 2032A election

    • Form 4349, Computation of Estate Tax Due

    • IRC 6166 election and attachments

    • Schedules A, B, F, G

    • Will and/or trust

    • POA, if provided

    • Listing of all businesses shown on the Form 706 with the EIN

  8. Additional Information:

    • If there is a protective IRC 6166 election made, send the required information to Advisory ETL group.

  9. Final Actions:

    • Send lien package to Advisory ETL group, issue closing letter if applicable, and close AIMS after holding Form 706 for 90 days.

Monitoring International Accounts

  1. International Accounts with Balance Owed: Closing letters cannot be issued to international accounts that have a balance due. The accounts must be monitored until the account is full paid. Once the account is paid, Letter 4944 along with the appropriate transfer certificates are issued.

  2. The balance owed can be from the original tax assessment or an audit assessment. All audited returns are forwarded to Centralized Case Processing (CCP) for closure. AIMS status 51/90 indicates the return is/was in CCP. Generally, CCP will forward international returns (Form 706 /Form 706-NA) to stop 824G for closing letter/transfer certificate action after they have completed their actions.

  3. The examiner should verify if the account is full paid or has a balance due.

  4. Full Paid Accounts:

    1. Update the closing letter database with the taxpayer, executor and POA data.

    2. Issue Letter 4944, Reply to Request for Transfer Certificate, and transfer certificate.

      Note:

      If there is a balance due, no closing letter or transfer certificate can be issued.

    3. Send the Form 706-NA to Files with Form 10023-B using the controlling DLN.

  5. Balance Due Accounts:

    1. Close the AIMS base (if still open) before filing Form 706-NA in the cabinet. Prepare Form 2275, Records Request, Charge and Recharge, copy pages 1 & 2 of Form 706-NA and BMFOLT print to send as your closing document.

    2. Open an IDRS control (or recontrol an open control) assigning to 0283000009, action AAF-BALDUE or similar activity and category ISPJ.

    3. File the Form 706-NA in the balance due cabinet with the other returns controlled to this number.

  6. Monitoring Balance Due International Accounts: The International TTT will monitor 6F report quarterly for zero balance. If the account has a TC 608 indicating Collections has written off the balance due to pending or expired CSED:

    1. Pull the return from cabinet.

    2. Notate expired CSED, do not issue closing letter or transfer certificate.

    3. Send the Form 706-NA to Files with Form 10023-B using the controlling DLN.

    4. Enter case information into the International 608 folder.

  7. If zero balance is due to a payment and there is no TC 420:

    1. Assign to a TE who will pull the return from the cabinet and check for accrued interest.

    2. If no accruals, issue Letter 4944 and transfer certificate.

    3. If accruals, input TC 290 for .00 with priority code 5 to post accruals to the account.

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Exam Activities

  1. Overview: Exam functions include case building, classification and correspondence audits. Correspondence audits involve estate returns and are incorporated in the work plan at the discretion of Workload Selection and Delivery (WSD).

  2. Case building is completed for all estate returns, specific gift returns, and projects designated by WSD or E&G Policy.

  3. Campus ETA and TTT classify all non-taxable estate returns, all international estate returns and international gift returns. All other estate and gift returns are classified by the field.

General Information

  1. The processing of Form 706 by submission processing automatically generates a TC 420 on the account once the TC 150 posts. The generated TC 420 causes the system to generate the following:

    • MFTRA C - Transcript

    • Labels

    • Form 5546, Examination Return Charge-Out, sheet

      Note:

      These three items are referred to as an audit package.

  2. Returns are established in EGC 1000. When the return posts and the TC 420 generates, an activity code is also generated based on the size of the estate. Current activity codes are:

    • 414 – Gross estate under $1,500,000.00 – non-taxable

    • 415 – Gross estate under $1,500,000.00 - taxable

    • 416 – Gross estate $1,500,000.00 - $4,999,999.00 – non-taxable

    • 417 – Gross estate $1,500,000.00 - $4,999,999.00 – taxable

    • 422 – Gross estate $5,000,000.00 – $10,000,000.00 – non-taxable

    • 423 – Gross estate $5,000,00.00 - $10,000,000.00 – taxable

    • 424 – Gross estate $10,000,000.00 - $20,000,000.00 – non-taxable

    • 425 – Gross estate $10,000,000.00 - $20,000,000.00 - taxable

    • 426 – Gross estate $20,000,000.00 and over – non-taxable

    • 427 – Gross estate $20,000,000.00 and over – taxable

  3. Activity codes 417, 423, 425 and 427 are classified by the field ETA. Activity code 424 is classified by paralegals in WSD. Activity codes 414, 415, 416, 422 and 426 along with all international returns are classified by campus TTT and ETA.

  4. Processed returns are sent to Files where they are housed until sent to Statistics of Income (SOI) and E&G for review. The returns cannot be sent until 45 days after the posting of the TC 150 has elapsed. SOI has the first opportunity to make their selection for review and should get all international returns. Returns are sent to SOI and E&G by cycle based on the lapse time. The returns pulled from the Files shelves are completed by cycle. Management ensures timely pull of the returns from Files for each cycle.

  5. SOI will provide a list of the returns selected for review. The list should be used to update AIMS to status 05 within 3 business days from receipt of list.

    Note:

    All international returns must be sent to SOI before sending to teams at Gateway Stop 824G for classification. If the return has not been to SOI upon purging, ship the return(s) to SOI on Form 3210.

  6. Gift Returns:Form 709 gift returns are stored at the C-Site which is part of the Kansas City Campus. Returns are filed alphabetically by the last name and held for 75 years. If returns are sent to the field or the campus for an audit or amended, the refile DLN will reflect a Cincinnati DLN. Older gift returns that were never requested from the C-Site, reflect the DLN of the center where the return was filed.

  7. Gift returns become part of the estate return once the estate return is filed. It is crucial to secure the gift returns and associate them with the estate return. The gift returns are needed for classification and audit if the estate return is selected for audit.

  8. Gift returns associated with the estate return are not established on AIMS as they are part of the estate return. Gift returns selected for audit, and an estate return is not filed, are established on AIMS.

Case Building

  1. The generated documents, see IRM 4.25.2.5.1 (1), General Information, are generally received before the returns are pulled from the shelves in Files for classification. Once the MFTRA C, MFTRA E, labels and Form 5546 are received, associate all information together and keep the audit package in SSN order by cycle.

  2. Gift returns must be requested from Files before an estate return can be classified.

  3. If the SSN appears to be invalid, forward to the Tax Examining Groups located in the Gateway Office for the correction of the SSN. Place an action request sheet on the front of the case prior to sending to Stop 824G.

  4. Sort Returns: When the Form 706 has been pulled from the shelves for classification, associate the audit package and break down the returns by:

    • Domestic/international estate returns needing associated gift returns

    • Domestic estate returns without gifts sorted by activity codes as reflected in the table in IRM 4.25.2.5.2

    • International without gift

    • Dropped entity – MFTRA E still needed

    • Invalid SSN – corrective actions needed

  5. Pull the advance file folders and associate all information with the appropriate case prior to classification. Notate on the Form 5351, Examination Non-Examined Closings, label A/F (advance file) for tracking purposes.

  6. Updating AIMS: Use labels and Form 5351 to update AIMS. Notate the EGC on top of Form 5351. If no label is available, then write the SSN and name control in the space, one SSN per space. Update to the appropriate EGC based on activity code as reflected in the table below:

    Activity Codes Update EGC To: Action
    417, 423, 425, 427 EGC 1036 File on shelf for field classification by cycle and alpha
    414, 415, 416,422 EGC 1056 Place on cart to ship to Gateway, Stop 824G
    424 EGC 1036 Place on cart to ship to Kentucky Drive, Annex Bldg.
    426 EGC 1046 Place on cart to ship to Gateway, Stop 824G
    International Return EGC 1002 Place on cart to ship to Gateway, Stop 824G
  7. Update the EGCs - EGC are updated by using IDRS CC AMSTU:
    AMSTU▴▴▴▴▴▴▴▴▴▴▴▴▴▴▴1077
    SSNV▴52▴000000▴NAMC

    Note:

    At the bottom of the screen, the number 1 should be on Column 16.

  8. Up to 20 cases can be updated at one time. Once the status update is complete, be sure that OK appears next to all cases that were input on the screen. If two asterisks appear next to an SSN, then there should be an error message at the bottom of the screen to identify the issue. If the case cannot be updated, then be sure to "X" out the label on the Form 5351 and pull the case from the flat for further actions. Refer case to lead for additional actions.

  9. Requesting Form 709 Gift Returns - Determine the number of gift returns required once the association of the audit package with the Form 706 is completed. This is accomplished by reviewing the entity information on the MFTRA A. Form 709 indicator reflects that gift returns are filed. Identify the appropriate returns and prepare a Form 2275 to request the gift returns. The following table provides the item numbers and required information that should be included on Form 2275.

    Item No. Required Information
    2. Form Number 709
    4. Tax Period ALL
    5. List Year ALL
    6. Document Locator Number ALL ALPHA FILES
    7. Name and Address of Taxpayer Place label here, or write first and last name and SSN
    8. Renumber Document Locator Number and Two-Digit Processing Year SEE BOX 19
    10. Approved Signature Managers Signature
    11. Date Date of request
    12. Request For: ("X" Proper box) "X" the "Other" box and specify "Associate with F706"
    13. Through 13G. and 13J. Provide the originator information
    14. Information/Action Requested "X" box A. Original Document
    15. Type of Request "X" box A. Initial
    19. Remarks List the tax years reflected on MFTRA
  10. Make three copies of the Form 2275. Two will be sent to C-Site and one will remain with the team. Form 2275 copies are kept in a team file folder. After verifying the requested gift returns were received, the Form 2275 can be destroyed.

    Note:

    The C-Site has reorganized the method of filing gift tax returns. There are only two areas of ALPHA files - the Cincinnati area and the district area. A search in both locations should be requested in all instances.

  11. Prepare a Form 3210. Include on the transmittal the taxpayer’s name, last 4 digits of the SSN and the number of Forms 2275 enclosed for the taxpayer. Enter the request in log book. This book is also kept in Service Center order.

  12. Mail the Form 3210 and the associated Forms 2275 to: 335 S. Geospace Dr. Independence, MO 64056. Place original estate return in the designated suspense area used for holding returns while waiting on the requested gift returns.

    Note:

    The C-Site does not receive mail via United States Postal Service (USPS) at the Geospace Drive address. Use United Postal Service (UPS).

  13. Gift Returns Received: The C-Site will send back the gift returns or a charge out indicting the return was not located. Pull the maintained copy of Form 3210 file folder, check off the request in the log book, and associate the gift return or charge out with Form 706 case file. Follow the chart in IRM 4.25.2.5.2 to ensure the return is classified by the correct area when all gift returns or charge outs are received.

  14. Purge of Gift Return Request in Suspense: If no response from C-Site is received, purge the case file after 6 weeks. Pull copy of request and associate with return so classifier knows the request was made but no response received.

  15. Returns Received from SOI: Check the Form 3210 to verify the returns listed are the returns received. Notate on the transmittal any discrepancies. Date and initial the transmittal and fax the acknowledgement copy back to SOI.

  16. Advance File Documents for Association: Documents for the advance file are sent via a Form 3210. Each document will have an AIMS print attached:

    • Verify the information is enclosed by checking the Form 3210 against the documents received. Return acknowledge copy of the Form 3210 to the appropriate workgroup.

    • Date stamp each AIMS print with the date received by E&G Files Support Team.

    • Check the AIMS print to ensure that the EGC is 1000. The cycle date will be reflected on the AIMS print.

    • If the cycle has not yet been pulled, verify the EGC is 1000 and place document in the advance file.

    • If the cycle has been pulled, check the EGC on AIMS and associate document with return.

    • If AIMS is closed, return the document to the originator for action.

Classification

  1. Form 706 estate returns are classified based on activity code as indicated in IRM 4.25.2.5.1 (3). Classification guidelines are updated and issued in the 2nd quarter of each fiscal year for campus classifiers. Guidelines should be dated and signed by the headquarters analyst. Additional updates may occur as issues are identified. For additional information on classification see IRM 4.25.3, Estate and Gift Tax Planning, Classification, and Selection.

  2. Some returns need additional work before classification can be completed. This includes:

    • Case perfection – classifiers will identify the need to secure missing or additional documents, schedules, appraisals etc. See IRM 4.25.2.5.3.1, Perfection of Forms 706 and 709, for additional information.

    • Stock valuations – stock values need to be verified. See IRM 4.25.2.5.3.2, Stock Valuations, for additional information.

    • Missing returns - See IRM 4.25.2.5.3.3, Missing Returns - Open AIMS.

  3. Case perfection is completed by a TTT and sent to Gateway Stop 824G. Stock valuations requested from the Field and Field classification are completed by clerical support unless the volume is high and technicians at Gateway need to assist. Stock valuations from the non-taxable return classifications are provided from the technicians at Gateway.

  4. Form 709 gift returns are screened for classification via a quarterly listing from Research. The criteria for the listing is updated by WSD. Once the screening process has been completed, release all non-selected returns to the Re-File team so they can be shipped to the C-Site for housing.

  5. All Form 706-NA international gift returns selected through E&G WSD Research data are pulled for classification. For all other international returns not on the listing:

    1. Refile if box 5 or 7 reflects the country as United States.

    2. Continue screening if box 5 or 7 reflects any other country or is left blank.

    3. Review line 7 and if it is greater than zero, pull for classification.

      Note:

      If the return reflects all zeros or return is all zeros from line 3 down, pull for classification.

Perfection of Forms 706 and 709
  1. Classifiers pull Form 706 and Form 709 when they need to secure missing or additional documents. These are assigned to a TTT on IDRS as “Perfection.”

  2. Determine if the perfection issue can be resolved without taxpayer contact using IDRS, Accurint or other research tools.

    • If the issue is resolved with research, follow "Accepted" procedures. For Form 706 see IRM 4.25.2.5.3.1 (7), Perfection of Forms 706 and 709, and for Form 709 see IRM 4.25.2.5.3.1 (11), Perfection of Forms 706 and 709.

    • Close IDRS "Accepted As Filed" (AAF).

  3. Determine if the issue should be an audit issue. Perfection should be for items required to be filed with the return such as appraisals, Form 712, Life Insurance Statement, etc.

    • If it is determined that audit involvement is required to resolve the issue, follow “select” procedures for Form 706 or Form 709.

    • Close IDRS base "SELECTED" .

  4. If taxpayer contact is needed, send Letter 5978, Estate or Gift Tax Return Incomplete for Processing, and suspend the case.

  5. When sending a perfected return to the National Gatekeeper, write on the top of the perfection sheet: Perfected Return to National Gatekeeper. This alerts the clerical team where the return should be sent.

  6. Form 706: If a reply is received, review information and determine if return will be accepted as filed or selected for NIW. Refer to campus ETA if needed.

  7. If Form 706 is accepted as filed:

    • Stamp return "Accepted as Filed" .

    • Have AIMS control closed and send closing letter if requested.

    • Close IDRS base "AAF" .

  8. If Form 706 is selected for NIW:

    • Prepare estate tax selection folder.

    • Close IDRS base "SELECTED" .

    • Send to NIW.

  9. If no reply to perfection letter:

    • Prepare selection folder notating "no reply to perfection letter" .

    • Close IDRS base as "SELECTED" or "NO REPLY" .

    • Send to NIW.

  10. Form 709: If a reply is received, review the information and determine if the gift tax return will be accepted as filed or selected for the gift tax NIW. Refer to campus ETA if needed.

  11. If Form 709 is accepted as filed:

    • Line through the form number "709" diagonally in the upper left corner of the return to let Files know E&G has looked at it.

    • DO NOT stamp accepted as filed.

    • Close IDRS base "AAF" .

    • Refile Form 709.

  12. If Form 709 is selected for gift tax NIW:

    • Prepare Gift Tax Classification Check Sheet.

    • Close IDRS base "SELECTED" .

    • Send to gift tax NIW.

  13. If no reply to perfection letter:

    • Prepare Gift Tax Classification Check Sheet notating "no reply to perfection letter" .

    • Close IDRS base as "SELECTED" or "NO REPLY" .

    • Send to gift tax NIW.

Stock Valuations
  1. Stock valuation research is used to determine whether the return should be submitted for verification of stock valuation. Request for stock valuations are received either during the classification detail or as a fax request from a Field Tax Attorney that is conducting an open audit.

  2. Any schedules with listed stocks or bonds should have a valuation completed. Do not write on the Form 706. Use post-it notes or a copy of the schedule to number the stocks and bonds. Committee on Uniform Securities Identification Procedures (CUSIP) numbers will be used to research values.

  3. Each stock/bond has a nine digit CUSIP number assigned to it. All stocks/bonds are valued using this number. Ticker symbols may be used only in cases where no CUSIP number can be found. The ticker symbol is provided by the estate.

    Note:

    A ticker symbol or stock symbol is an abbreviation or arrangement of characters used to identify publicly traded shares of stock. A ticker or stock symbol is comprised of letters, numbers or a combination of both.

  4. After all CUSIP numbers have been found, use the Estate Val program to research the stocks/bonds. Complete the following:

    1. Enter Date of Death along with the CUSIP number.

    2. Total number of shares.

    3. Total value of the stock/bond and interest or dividends provided on the estate tax return.

  5. Once the above information has been entered, generate a report and place report in the case file. If the case was received from classification, update on IDRS AIMS to Status 06, EGC 1067 and give to the National Gatekeeper to continue the classification. If received from a field attorney, return by e-mail as a .pdf file.

  6. When completing a stock valuation, be sure to check all items that can be valued. Only publicly traded items can be valued. Below is a list of items that can be valued using the Estate Val program:

    • Stocks

    • Bonds

    • Mutual Funds

    • US Treasury Notes

    • US Treasury Bonds

    • US Treasury Bills

    • US Savings Bonds

  7. Items that cannot be valued:

    • Money Markets

    • Promissory Notes

    • Cash

    • Personal property

  8. Date of Death or Alternate Valuation Date: Look on page 2, Part 3, Line 1 of the Form 706 tax return. If they have elected alternate valuation you will use the alternate valuation values listed. If they have checked “no” or left blank, you will then use the date of death values.

  9. Researching CUSIP numbers using CUSIP global services: Issuer name is the name of the stock/bond. Enter the name of the stock/bond into one of the following lines per the following criteria:

    • If the name of the stock is correct, then enter the name beside “START with”. This searches for the name as it appears. For example, Dean Stanley Morgan Witter – this would search this information exactly as it appears, so possibly no results.

    • If unsure of the name or the order of the name being researched, then type this information in the CONTAINS section. This will search for all available information that appears and will not restrict the search to only as input. For example, Dean Stanley Morgan Witter – this would search all information in any order, so you will receive all possibilities for the information given.

  10. Each stock/bond can have multiple issues:

    • Common

    • Preferred

    • Class A

    • Class B etc.

  11. The more information provided, the better chances are of finding a match. For stocks, if no information is listed other than the name of the stock, assume it is either common or Class A whichever is available.

  12. Field Descriptions:

    • Common enter "com"

    • Preferred enter "pfd"

    • Class A enter "cl a"

    • Class B enter "cl b"

      Note:

      If nothing is input in this field, the website will bring up every issue for that stock.

  13. A bond could have many issues such as using percentages, date of issuance and dates of maturity. Bonds must have percentage and maturity date input to find the CUSIP information. If the schedule does not list this information, the chances are that no CUSIP information will be found.

  14. Enter the maturity date into the field as MM/DD/YYYY; next enter the percentage in the rate field. The percentage must be entered with the decimal and not as a fraction. For example, 7 3/4 would be entered as 7.75. After all information is entered, click the search button. This gives all possible information. On this screen, the top will list all possible issuers based on the information requested. Select the Issuer you need and click on display issues. This will display the information at the bottom of your screen. To get the CUSIP number, you take the six numbers from beside the Issuer at the top of the screen (for example, AT&T is 001957) and the three numbers from the correct issue at the bottom of the screen (for example, Com is 109). Write the number down on a post-it note on the return next to the name of the stock/bond with the Issuers number first and the issue number following, for example, 001957109. This will need to be completed for each stock/bond reported.

  15. If you are unable to find a CUSIP number or unable to determine which number is correct, put a check mark on the post-it note or copy of schedule along with any information as to what information you need to find the correct CUSIP number.

  16. Using Estate Val Program: Enter the date of death from page 1 box 5 of the Form 706. Hit the tab key. The alternate valuation date will automatically appear. Even if you will be using the date of death ONLY, the program automatically calculates the alternate valuation date.

    • Enter the decedent’s name and the schedule you are valuing. For example, Schedule B, and hit the tab key.

    • Enter the CUSIP number for the first stock and hit enter.

    • Enter under shares the number of shares held in the stock or the face value of the bond and hit enter.

    • Enter under return Val., the total value of the stock or bond on the return and hit enter. If date of death was elected by the estate, enter the date of death values. If the alternate valuations were elected, then enter that value.

    • Enter under return Acc, any interest or dividends reported on the Form 706 for that stock or bond and hit enter.

      Note:

      If more than one stock or bond needs to be researched, then go to the next number and repeat the above steps.

  17. After all stocks and bonds are entered in the template, go to the top of the screen using the mouse and click on Evaluate. Choose either date of death or alternate valuation whichever the taxpayer elected on page 2 part 3 of the Form 706 tax return. The tool will request a name for the report. The name of report will consist of the first initial of the last name, the last four digits of the SSN and the schedule valued and year. For example, the estate of John Doe, SSN 000-01-6789 and valued schedule B. The year you are valuing the report is 2013. The report name is D6789B-13.

  18. After the report is named, hit enter to begin the valuation. A progress bar will appear to let you know that the report is being generated. After the valuation is complete, a preview of the report will automatically appear. Check the report for any problems. If corrections are needed, click on close and go back to the template to make any necessary correction and hit valuation again. If the correction is the number of shares or total value of interest/dividends, go to report and choose either the date of death or the alternate date. This recomputes the new figures per the value already obtained. Print report once all corrections have been completed. A copy of the report will be placed with the case file.

  19. Caution: When using the alternate valuation date, the schedule may list dates that the stocks/bonds were sold before the alternate valuation date, but after the date of death. These must be valued using the sale date. To do this, after you enter the CUSIP number, shares, total value and interest/dividends, make sure a box on that line is highlighted and then with the mouse click on adjust inventories at the bottom of the template. A box will then appear. Click the tab that states alternate valuation date, then click “edit” and enter the number of shares that are still owned as of the alternate date. Click OK and “add” and enter the number of shares sold. Next go to action, use the drop-down menu to select “sold” and enter the date to the right of action and enter the sold date and click OK. The adjusted inventory now shows number of shares held on the alternate valuation date and the number of shares sold along with the date they were sold. Hit OK again and the tool will go back to the template. This must be done for each stock sold before the alternate valuation date.

Missing Returns - Open AIMS
  1. The clerical team manager checks the Statistical Sampling Inventory Validation Listing (SSIVL) for cases that have been on the listing for six months or longer in AIMS status 06, EGC 1000, waiting for classification, with no updates. The cases are assigned to a TTT to determine the status of the return regarding classification. Complete the following actions:

    • Check E&G database to see if closing letter was issued or the return was selected for audit without AIMS update.

    • Research IDRS to see if the return was removed from the classification process.

    • If in any EGC other than 1000 and return is not located, send Form 2275 request to Files for return and any advance files.

    • If return is not received, check AIMS to determine if the return was pulled by SOI prior to classification. If so, request a copy of the scanned return from SOI. Use copy as the original.

    • If the return is located, continue with the classification process.

  2. If return is not located, close AIMS with DC 29 "Missing Return" :

    • Prepare a history sheet with a record of all research performed.

    • Monitor AIMS for the Disposal Code (DC) 29. The TC 421 should post one cycle after the DC 29.

    • When TC 421 posts, input TC 290 for zero, BLK 06, Source Document (SD) Remarks "To Satisfy & Renumber Acct" . Prepare adjustment folder and send to Files.

Closing Estate Returns

  1. The following sections provide guidance for closing accepted as filed estate returns and issuing closing letters.

Closing Procedures
  1. Returns accepted as filed are closed by the clerical team. The return reflects a stamp showing the return is accepted as filed. Any return that is missing the stamp should be returned to the lead TE. Actions needed to close include, closing AIMS with appropriate closing codes, preparing the case for Files and issuing closing letters if requested by the estate. See IRM 4.25.2.5.4.2, Closing Letters, for closing letter procedures.

  2. Preparing a case for Files routing involves ensuring appropriate case file assembly. This includes breaking down the case by removing unnecessary bindings, clips, folders, dividers, and so on.

  3. Form 5351, Examined Non-Examined Closings, is used to finalize research and close AIMS. Attach an AIMS label to Form 5351 prior to breaking down the cases.

  4. Using the Form 5351, research using IDRS CC BMOLI to check for freeze codes A, F or R. If one of these freeze codes are present, cross out the label on the Form 5351 and attach to the case an Action Request sheet. See Exhibit 4.25.2-4, Action Request. Send the case to one of the E&G Tax Examining Teams at Stop 824G for further action.

  5. Use Form 5351 to close cases off AIMS using IDRS CC AMSOC:
    AMSOC▴▴▴52▴60▴00X
    SSNV▴000000▴NAMC▴20

    Note:

    Each day should start with sequence number 001.

  6. AMSOC allows closing 20 cases at one time. Check that actions are completed by verifying that the word "OK" and the sequence number are next to each SSN input. If there are two asterisks, an error message will appear at the bottom of screen. If the case cannot be closed and needs further action, remove the case file and cross out the label on the Form 5351. Print the AMSOC screen and attach to the back of Form 5351.

  7. Sequence numbers are noted on the Form 5546, Examination Return Charge-Out, attached to the return, in the section at the bottom of this form, FOR REC/CTR USE. Input your IDRS number and the sequence number from the AMSOC screen associated to that return, for example 001.

    Note:

    The numbers for the next set of the AMOSC sequence numbers continue from the previous AMSOC print. For example, the next sequence number would be 021 if the first 20 cases were accepted without any issues.

Closing Letters
  1. Letter 627, Estate Tax Closing Letters, are provided upon request from executor/POA for estate returns filed on or after June 1, 2015. Prior to this date, closing letters were issued for all estate returns. A closing letter cannot be issued if the estate tax return has not been classified or if the return is selected for audit.

  2. See the following IF/AND/THEN table for responding to closing letter requests:

    IF AND THEN
    AIMS Status 90 - closed   Issue the closing letter if requested by the estate.
    AIMS Status 00-08 Not assigned or classified Respond that the closing letter request is premature because the return is still in processing.
    AIMS Status 10-12 Assigned to a Field Group Respond that the closing letter request is premature because the case is still open.
    AIMS is open The case is in EGC 1075 (TTT Perfection) Respond that the closing letter request is premature.
    AIMS Status 13-89 The return has been examined, but is not yet closed (Appeals, Counsel, or CCP) Respond that the closing letter request is premature.
  3. Phone Requests: After the call has been completed, place the call in wrap status and issue the closing letter. If the caller is requesting closing letters for multiple accounts, the phone assistor can tell them to fax the requests. This would be considered phone to paper and counted as correspondence.

  4. Fax Requests: If a fax request for a closing letter is premature, contact the estate to let them know.

    Note:

    Contact can be by mail or phone.

  5. All closing letters should be issued from the IMS closing letter database. Place letters in the "Quality Review" basket. When the Program Analysis System (PAS) completes the pull of letters for review, the clerk gives the remaining letters to the examiners to mail.

    Note:

    If a closing letter is generated from a phone call, do not put a copy of the letter in the "Quality Review" basket. PAS will review the letter from the IMS closing letter database.

Referrals

  1. The following sections provide guidance for informant referrals and the turnaround response time for technical referrals.

Informant Referrals
  1. Information received concerning an estate or gift filings are called informant referrals. The informant referrals are taxpayer-generated. Taxpayers submit information to report suspected or perceived tax law violations by other taxpayers. Most referrals are on Form 3949-A, Information Referral, Form 3949, Information Report Referral, or in correspondence.

    Note:

    Most referrals received in E&G are from Dept. ICT-31114, Fresno, CA. The balance is regular E&G correspondence or from the field (RO, ETA, etc.).

  2. Informant referrals are reviewed by the Referral Coordinator for E&G issues. Non-E&G issues (income, embezzlement, trusts, etc.) are forwarded to the appropriate office. See IRM 3.10.72.19.2, Form 3949-A Information Referral Routing Guide. Most of the referrals fall into this category.

  3. Informant referrals with possible E&G issues are researched for estate or gift tax returns filed, asset reporting, potential tax deficiency, noncompliance, etc. Referrals with audit potential are referred to the campus E&G National Gatekeeper for consideration. The National Gatekeeper sends these referrals to a WSD Project Coordinator to review and select for examination.

Technical Referrals
  1. Technical referrals assigned to TTTs and ETAs are to be considered and a response issued in five days. The turnaround time can be extended to 10 days if technical volumes increase substantially during the filing period for gift returns (February through May.) Any technical referral requiring additional time for consideration will need management approval.

Form 706-GS(D) and (D-1) Matching Program

  1. Clerical: Sort documents using the following criteria:

    1. Separate documents with a Form 706-GS(D), Generation-Skipping Transfer Tax Return for Distribution or amended Form 706-GS(D) attached – these require immediate attention.

    2. Form 706-GS(D-1), Notification of Distribution from a Generation Skipping Trust, reflecting the word cash in column b and zero in column e – send to Files. See IRM 21.7.5.4.4.2(2), Form 706-GS(D-1) Processing.

    3. Form 706-GS(D-1) reflecting the word cash in column b and a fraction or 1 in column e – batch in volumes of 25 or less.

    4. Form 706-GS(D-1) reflecting other than cash in column b – batch and refer to manager.

  2. Examiners: For cases meeting the criteria set in items a and c above, use the screening procedures below before referring to WSD.

  3. Screening of Form 706-GS(D-1) when no return filed or a mismatch is identified:

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • Compute the tax on the distribution in column f using the following information on forms with a distribution of ≡ ≡ ≡ ≡ ≡ ≡ or more.

      Note:

      If return is filed later, associate Form 706-GS(D-1) with the return.

  4. Generation-Skipping Transfer Tax Rate: GST tax is calculated at the maximum rate for federal estate tax for the year of the Generation-Skipping transfer. See IRM 3.12.106.4.3.1(3), Maximum Tax Rates Table.

    Note:

    Schedule R-1, Generation-Skipping Transfer Tax, is used to determine the GST tax that is payable by certain trusts includible in the gross estate.

  5. Forms that reflect≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , send to Form 706-GS(D-1) Coordinator for tracking since taxpayers can have more than one form filed on their behalf. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  6. Forms that reflect ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , assemble a case file with transcript and return:

    • Print the screen research reflecting the non-filing condition.

    • Annotate the tax on the screen print.

    • Send built case to Coordinator.

    • Coordinator will send built cases to WSD Paralegal to send to the Field.

  7. Forms 706-GS(D-1) reflecting other than cash in column b:Reference for processing is in IRM 21.7.5.4.4.2, Form 706-GS(D-1) Processing, but there will be a deviation from the chart. For example, if a blank Form 706-GS(D-1) is received, send Letter 5666, F706-GS(D-1) Missing Information, to preparer.

    • Research to determine if the Form 706-GS(D) was filed.

    • Compute the tax owed based on the distribution.

  8. If Return Filed:

    • Verify the tax is equal to or greater than the tax due per the distribution and file the D-1 with the Form 706-GS(D).

    • Request the Form 706-GS(D)≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . File the Form 706-GS(D-1)≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    • If the D-1 involves property, request the Form 706-GS(D) and send to WSD for classification.

    • If the D-1 has attachment reflecting the stock value, order the return. When the return is received, send the document to the designated examiners that process the stock valuations.

    • Once the stock valuation is completed, send the return to WSD for classification.

  9. If No return filed:

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • Annotate the amount of tax owed on the printed research.

    • Request forms with stock values for stock valuation and send to WSD for classification.

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • Send forms with attachment or reflecting distributions ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ to WSD for classification.

Miscellaneous

  1. The following sections provide guidance for Form 3870 and IAT Tools.

Form 3870 Request for Adjustment
  1. E&G campus will work all Form 3870, Request for Adjustments, (Domestic and International), with one exception:

    • If there is an open audit, resulting in a TC 300/301 tax adjustment, send to CCP to process. Once AIMS is closed and a request is received for a tax adjustment, E&G will process the adjustment, not CCP.

  2. If AIMS is open and the case is on the NIW, contact the National Gatekeeper.

  3. Requests will be received by fax and/or eFax and monitored daily.

  4. Cincinnati Campus E&G unit will be responsible for payoff computations related to IRC 6166 accounts and penalty adjustments or abatements to all E&G accounts. Philadelphia CCP Field Office Resource Team (FORT) will be responsible for payoff computation (interest and penalties) related to IRC 6161 accounts.

Payoff Requests
  1. Payoff requests for IRC 6166 accounts are received from the Department of Justice (DOJ) and Revenue Officers (ROs). The requests are sent to the IRC 6166 e-mail box, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

  2. Computation is at the discretion of the examiner whether Notebook or COMPAX is used.

  3. Requests should be processed within 14 calendar days of receipt. However, DOJ may need a shorter time. ROs will mark expedite, if needed.

    Note:

    Include all computations with the payoff response.

Integrated Automation Technologies (IAT) Tools
  1. E&G Operation employees are required to use the Integrated Automation Technologies (IAT) tools, shown in the tables below, whenever possible. The use of some of the tools is mandatory. The IAT tools simplify processing by assisting the user with IDRS research and input. The tools reduce the chance of errors and improve productivity. They are desktop productivity enhancing tools.

    Note:

    The IAT website at https://organization.ds.irsnet.gov/sites/WiMttIat/IATJobAids/default.aspx has a list of all available tools, description and job aid for each tool.

  2. If an IAT tool is not available, or an employee has a problem with the IAT Tool Manager (ITM), the case should be processed manually. Employees should report any issues with the ITM to management.

  3. IAT tool users can visit the IAT website at http://iat.web.irs.gov/ to sign up as a subscriber to the IAT newsletter. The iNews details all ongoing IAT activity with tool retirements and rollouts.

  4. The following Mandatory IAT tools are to be used:

    • Address

    • Credit Transfer

    • Disclosure

    • Fill Forms

    • Letters

    • REQ 54

    • REQ 77

  5. The following Suggested IAT tools are available for processing E&G cases. This list is not all inclusive:

    • Act On

    • Clerical

    • Closures

    • ESTAB

    • Histories

    • Manager Security

    • New Name Search

    • Payment Tracer

    • Phone Number

    • Quick CC

    • Search 6209

    Note:

    Check the IAT Website https://organization.ds.irsnet.gov/sites/WiMttIat/IATJobAids/default.aspx for additional tools.

Identity Theft
  1. Refer to IRM 25.23.9, BMF Identity Theft Processing.

Disaster
  1. −O (Disaster Indicator) freeze refer to IRM 21.5.6.4.30, Freeze Codes, −O Freeze.

  2. −S (Disaster Indicator) freeze refer to IRM 21.5.6.4.37, Freeze Codes, −S Freeze.

Other Information

  1. The following sections provide information about E&G projects and reports.

Projects

  1. The campus assists the field or WSD with case building upon request. Guidance and procedures will be provided by headquarters when projects are requested. Information concerning the volume, cases assembled, cases needing to be assembled, etc. are captured on the Week at a Glance (WAAG) report.

Reports

  1. E&G uses inventory reports from AIMS, Masterfile, Case Control Activity System (CCA) and internal databases to assign inventory, level case assignments, and monitor for aged inventory. Reports should be generated weekly and reviewed for age and accuracy. See IRM 1.4.29, SB/SE Campus Exam/AUR, Exam Operations, Exam Managers’ Guide, for additional information on reports.

  2. AIMS Inventory Reports: Monitor this report for any returns older than six months that are not in SOI. The AIMS/ERCS Program Analyst provides this report weekly.

  3. Week at a Glance (WAAG) Report: The WAAG is completed by the campus Planning and Analysis staff (P&A) and provided to SB/SE Examination Headquarters (HQ) analyst. Changes or updates to this report are accomplished through discussion between HQ, the operation, and P&A.

  4. Case Control Activity System (CCA) Reports: The CCA reports are used to manage inventory. Managers should notate the CCA report to address aged cases.

  5. Unpostable Report: Monitor this report to ensure the unpostables are resolved timely.

    Note:

    For unpostable resolutions refer to Document 6209, IRS Processing Codes and Information.http://serp.enterprise.irs.gov/databases/irm.dr/current/6209/6209.html, Section 8B-4 or IRM 3.12.279, Error Resolution, BMF/CAWR/PMF Unpostable Resolution.

    Note:

    The CCA and Unpostable reports are located on Control-D/WebAccess. For access go to http://mtbcontrold.enterprise.irs.gov/. For additional information see IRM 1.4.29.3.1, Reports Available Using Control D.

  6. Installment and Extension Database Reports: Generate these reports to ensure timely action. Monitor all correspondence waiting for a response. Print the follow-up report from the database as early in the work week as possible. Scan the report for weekly actions. Complete all actions by the end of the week. Notate the actions taken on the report. Give the report to the manager at the end of the week.

IRM Links

  1. The following are IRM links to E&G Exhibits:

    • IRM 3.12.263, Exhibit 6, Table A Unified Tax Rate Schedule (Form 706 and Form 709.)

    • IRM 3.12.263, Exhibit 7, Table B For Computing State Death Tax Credit (1977-2004.)

    • IRM 3.12.263, Exhibit 14, Estate and Gift Tax Facts.

Estates-Pro-Rate Interest Without Overpayment

Example:

2% Limitation in 2010 $ 469,000.00

Deferred Tax Amount $1,200,000.00

Account Balance $ 720,000.00 ($1,200,000-$480,000), 5th year installment billing, four installments paid.

Interest must be pro-rated when the deferred tax amount is greater than the 2% or 4% allowable amount.

In the example, above, the deferred tax amount of $1,200,000 is greater than the 2% allowable amount of $469,000, so the interest must be pro-rated between the 2% rate using COMPA 2 and the 45% of the statutory rate using COMPA 5.

The pro-rate interest calculation from the example above is as follows:

1. Tax Allowable Amount $469,000.00 divided by Deferred Tax Amount $1,200,000.00 = .390833 (need to calculate to 6 decimal places).

2. Account Balance $720,000.00

X

From Calculation, Above .390833

=

Amount subject to 2% rate using COMPA 2 $281,399.76

3. Account Balance $720,000.00

Minus Amount subject to 2% rate $(281,399.76)

Amount subject to 45% of statutory rate $ 438,600.24

using COMPA 5

After computing the interest, post the amount on the worksheet broken down as 2%, 4%, 45%, or statutory. If an installment of tax is due, post it on the worksheet. The interest amount is added to the folder balance. Do not add the tax installment to the balance.

Estates-Pro-Rate Interest with Overpayment

Example:

2% Limitation in 2010 $ 469,000.00

Deferred Tax Amount $ 1,200,000.00 (first installment with $80,000 overpayment)

Account Balance $ 1,120,000.00

Interest must be pro-rated when the deferred tax amount is greater than the 2% or 4% allowable amount.

In the example, above, the deferred tax amount of $1,200,000.00 is greater than the 2% allowable amount of $469,000.00, so the interest must be pro-rated between the 2% rate using COMPA 2 and the 45% of the statutory rate using COMPA 5.

The pro-rate interest calculation from the example above is as follows:

1. Tax Allowable Amount $469,000.00 is divided by the Deferred Tax Amount $1,200,000.00 = .390833 (need to calculate to 6 decimal places.)

2. Account Balance $1,120,000.00

X

From Calculation, Above .390833

=

Amount subject to 2% rate using COMPA 2 $ 437,732.96

3. Account Balance $1,120,000.00

Minus Amount subject to 2% rate $ (437,732.96)

Amount subject to 45% of statutory rate $ 682,267.04

using COMPA5

After computing the interest, post the amount on the worksheet broken down as 2%, 4%, 45%, or statutory. If an installment of tax is due, post it on the worksheet. The interest amount is added to the folder balance. Do not add the tax installment to the balance.

Waiver of Right to Administrative and Judicial Review of Termination of IRC 6166 Election

Department of the Treasury -Internal Revenue Service

In reply refer to: (Name of Taxpayer)

Taxpayer Identification Number

Person to Contact:

Employee Identification Number

Contact Telephone Number

We understand from your prior correspondence that the Estate of , SSN , (hereafter the Estate) has requested to waive its rights to obtain administrative and judicial review prior to the termination of its extended time for payment of estate tax provided in IRC Section 6166.

The Estate hereby acknowledges its agreement to voluntarily terminate the Section 6166 election, in accordance with the provisions for acceleration of payment under Section 6166(g). The Estate further acknowledges its agreement that the termination will be immediate, the Section 6166 election will cease to apply and the full amount of the unpaid tax, penalties and interest will become due upon notice and demand.

Prior to such termination, the Estate would ordinarily be provided a Letter 950, Preliminary Internal Revenue Code Section 6166 Determination Letter, which advises the Estate of the Service’s intent to terminate its Section 6166 election, and allows the Estate to request a conference with the IRS Office of Appeals within 30 days. Following the conference, if the termination of the Section 6166 election is sustained by Appeals, the Estate would ordinarily be provided with a Letter 3570, Notice of Determination As Provided in IRC Section 7479 That Extension of Time for Payment Under IRC Section 6166 Has Ceased to Apply. The Letter 3570 would allow the Estate, within 90 days, to file a petition with the Tax Court for judicial review, under Section 7479.

Because the Estate agrees that the termination of the Section 6166 election is appropriate, it recognizes there is no need for further review with Appeals or the Tax Court. Accordingly, the Estate waives the right to receive the Letter 950 and Letter 3570. By waiving this right, the Estate acknowledges that it is voluntarily forgoing all rights to challenge or appeal the termination of the Section 6166 election administratively or judicially. Instead, the Estate will receive Letter 6335-F, Notice and Demand for Payment of Entire Estate Tax Liability, with a copy of this letter.

The Estate’s Section 6166 election will be terminated upon receipt of this letter by the IRS acknowledging the forgoing conditions and signed by the current executor of the Estate responsible for handling matters arising under Section 6166. The undersigned hereby represents that he/she is the current Executor of the Estate with the authority to voluntarily waive the Estate’s rights to obtain administrative and judicial review prior to termination of its Section 6166 election, and hereby consents to the immediate termination of that Section 6166 election.

Name: __________________

Address: ________________

Signature of Executor: ________________

Date: __________________

The agent designated to represent the estate for all dealings with the Internal Revenue Service on matters arising under section 6166 acknowledges the Estate’s request for immediate termination and the above conditions. Please attach a completed Form 8821 if the designated agent is not the executor.

Name: ________________

Address: ______________

Telephone Number: _____________

Fax Number: ___________________

Signature of Agent: ______________

Date: ______________

If you have any questions, please contact the person identified in the heading of this letter.

Sincerely,

Team Manager
E&G Unit
Cincinnati Compliance Services

ACTION REQUEST

FROM: __________________ DATE: ________________

CYCLE: __________________EGC: _________________

ISSUE: _________________________________________

ACTION TAKEN: _________________________________

________________________________________________

________________________________________________

________________________________________________

________________________________________________

TE/TTT INITIALS _________ DATE: __________________