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January 24, 2017

A Substitute for Estate Tax Closing Letters

In Notice 2017-12 (the “Notice”) the IRS announced that an “account transcript” from the agency can substitute for an Estate Tax Closing Letter (“ETCL”).
An ETCL (IRS Letter 627) generally indicates that, for purposes of determining the estate tax liability of a decedent’s estate, the IRS examination of a federal Estate (and Generation-Skipping Transfer) Tax Return (Form 706) is closed, barring certain circumstances. The letter is not a formal closing agreement with the IRS, which would render the estate’s examination “permanently and conclusively closed”.

With certain exceptions and prior to June 1, 2015, the IRS issued an ETCL for every estate tax return filed. After that date, the IRS changed its policy and only issued such a letter upon formal request by an estate and not sooner than four months after the filing of the Form 706. Such requests may still be made. However, an “Account Transcript” (“AT”) may substitute for an ETCL.

An AT is a computer-generated report that provides current account data. The information provided includes, but is not limited to, the return received date, payment history, refund history, penalties assessed, interest assessed, the balance due with accruals, and the date on which the examination was closed. The closure of an estate’s tax examination is evidenced by inclusion of a transaction code of “421” on the AT.

The AT is requested by way of Form 4506-T, Request for Transcript of Tax Return, which can only be filed at present by mail or facsimile, and not through the IRS’ “Transcript Delivery System”.

Neither an AT nor an ETCL request requires payment of a fee. According to Form 4506-T, a request for an AT is usually processed within ten business days. However, the Notice states that: “To allow time for processing the estate tax return, requests should be made no earlier than four months after filing the estate tax return.” Finally, the Notice states that “For those who wish to continue to receive estate tax closing letters, estates and their authorized representatives may call the IRS at (866) 699-4083 to request an estate tax closing letter no earlier than four months after the filing of the estate tax return.”

In sum, the AT and ETCL processes are not much different. The main difference is that the ETCL request requires a phone call to the IRS, while the AT request may be mailed or faxed. Eventually, an AT request might be made through the IRS’ Transcript Delivery System.

For help with issues of estate administration, taxation, and estate planning please contact a PK Law Wealth Preservation Attorney click here or contact information@pklaw.com.

This information is provided for general information only. None of the information provided herein should be construed as providing legal advice or a separate attorney client relationship. Applicability of the legal principles discussed may differ substantially in individual situations. You should not act upon the information presented herein without consulting an attorney of your choice about your particular situation. While PK Law has taken reasonable efforts to insure the accuracy of this material, the accuracy cannot be guaranteed and PK Law makes no warranties or representations as to its accuracy.