Open the estate, marshal the decedent’s assets, file the estate tax return, pay estate taxes and debts, receive the estate tax closing letter from the IRS, and distribute the remaining assets. While overly simplistic, this chronological checklist has been the general order of business for large estates for generations.
Prior to June 2015, estate representatives could expect the IRS to either issue an estate tax closing letter after reviewing and approving the Estate’s Form 706 (the estate tax return) or after completing an examination of the Estate’s Form 706. However, the IRS announced in June that it would no longer be automatically sending estate tax closing letters as a matter of course. For estate tax returns filed after June 1, 2015, the IRS will only send estate tax closing letters on request. The IRS has, however, provided an alternative means for interested parties to determine the status of a filed Form 706 via its transcript system.
Registered tax professionals can access transcripts online using the Transcript Delivery System (TDS). The professional must be authorized to represent the estate on either a Form 2848 (Power of Attorney) or a Form 8821 (Tax Information Authorization) that the IRS has on file.
When using TDS, professionals should be on the lookout for “Transaction Code 421,” which indicates that the estate tax return has been accepted as filed or that the examination is complete. The absence of “Transaction Code 421” indicates that the return is under review.
Alternatively, professionals and estate representatives may elect to use Form 4506-T, which can be mailed or faxed. Parties electing to use Form 4506-T should pay special attention while completing the form since this particular form has multiple uses. If the professional or estate representative opts to use Form 4506-T, he or she should be prepared to submit proof (Letters Testamentary, Form 2848, etc.) that he or she is authorized to receive the requested information.
Note that, whether the interested party opts to use TDS or Form 4506-T, the IRS estimates that its decision to audit a Form 706 typically takes between four and six months. Therefore, the professional should wait at least that long to check an estate’s status.