IRS Permits Account Transcripts to Replace Estate Tax Closing Letters

Editor: Sally P. Schreiber, J.D.

On Jan. 6, the IRS announced that executors, probate courts, state tax departments, and others who rely on estate tax closing letters for confirmation that the IRS has closed its examination of an estate tax return can rely on an account transcript issued by the IRS in place of an estate tax closing letter (Notice 2017-12).

An estate tax closing letter confirms that the IRS has accepted the estate tax return, either as filed or after an IRS adjustment that the estate has agreed to, and the receipt of the letter generally indicates that the estate tax return examination has been closed.

The IRS had issued a closing letter for every estate tax return filed, except for those returns filed only for the purpose of electing portability under Sec. 2010(c)(5)(A) when the portability election was denied. However, since June 1, 2015, the IRS has issued estate tax closing letters only when the estate requests one, and that request must be made at least four months after the estate tax return is filed. Estates and authorized representatives can request an estate tax closing letter by calling the IRS at 866-699-4083.

Because it no longer automatically issues an estate tax closing letter, the IRS has announced that an account transcript can substitute for a closing letter (and is available at no charge). Data in an account transcript include the return-received date, payment history, refund history, penalties and interest assessed, balance due, and the date the examination was closed. The IRS says that if an account transcript includes a transaction code 421 and the explanation “Closed examination of tax return,” this means that the Service has closed its examination of the return, and this account transcript can serve as the functional equivalent of an estate tax closing letter.

Estates and their authorized representatives can request an account transcript by filing Form 4506-T,Request for Transcript of Tax Return. The IRS’s online Transcript Delivery Service is not available for this purpose; Forms 4506-T must be mailed or faxed to the IRS. The AICPA Trust, Estate & Gift Tax Technical Resource Panel continues to discuss the issue of the unavailability of online estate tax return account transcripts with the IRS.

The IRS’s notice comes almost one year after Troy Lewis, CPA, then the chair of the AICPA Tax Executive Committee, sent aletteron behalf of the AICPA to the IRS requesting that the Service formally announce its policy regarding estate tax closing letters and that the IRS consider providing closing letters (and not just account transcripts) through its Transcript Delivery Service (the letter is available at www.aicpa.org). The AICPA also requested the IRS revise Form 706,U.S. Estate (and Generation-Skipping Transfer) Tax Return, to add a box to check to request a closing letter, or allow estates to request a closing letter by adding a handwritten request on top of the first page of the Form 706 or attaching a closing letter request to the Form 706 when it is filed.