What Is IRS Form 706?
An executor of an estate must file Form 706 when the estate of a deceased U.S. resident or citizen exceeds $12.92 million. This is based on the gross amount of an estate, exemptions, and adjusted taxable gifts.
IRS 706 is used to calculate any taxes owed to the IRS by the deceased estate owner. In addition, a 706 form also determines the amount for the generation-skipping transfer tax as described by Chapter 13 of the Internal Revenue Code (IRC).
Who Files Form 706 for Estate Taxes?
When someone drafts a will, they indicate who they want to be the estate’s executor. An executor fulfills the wishes of the deceased regarding their estate. Responsibilities of an executor include ensuring beneficiaries receive items or money left to them, paying off any debts, and submitting Form 706 to the IRS.
The absence of a will and a designated executor of an estate allows the state to step in and activate probate court proceedings. In this case, a probate court judge will name an executor who must then file Form 706 and perform all other executor duties.
Do All Estates File a 706?
No, not all estates file IRS Form 706. Executors can determine if they must file a 706 by adding the following amounts:
- The gross value of an estate when the decedent passes.
- The adjusted taxable gifts made by the deceased.
- Total exemptions allowed for gifts made by the deceased.
Examples of what constitutes a decedent’s gross estate include but are not limited to:
- Saving and checking accounts
- Money market and retirement accounts
- Cash
- Investment accounts
- Personal items owned by the deceased (electronics, antiques, collectibles, furniture, vehicles, boats, and jewelry)
- Money owed to the deceased by individuals or entities
- Life insurance policies
- Bonds
- Sole proprietorships, LLCs, partnerships
As mentioned earlier, only estates valued over $12.92 million (2023 amount) are required to file Form 706.
What Is the IRS Form 706 Filing Deadline?
An executor of an estate must file IRS 706 no later than nine months after the death of the estate owner.
The IRS will refer to the date of death written on the official death certificate to determine if Form 706 was filed before the deadline.
If you mail Form 706 yourself, send it to:
Department of the Treasury
Internal Revenue Service
Kansas City, MO 64999
If you use a delivery service (FedEx, DHL, UPS, etc.), send Form 706 to:
Internal Revenue Service
333 W. Pershing Road
Kansas City, MO 64108
You cannot e-file IRS Form 706. It must be sent to the IRS via postal mail or PDS (personal delivery service). However, you can make payments due for Form 706 estate taxes electronically.
Can You Ask for an Estate Tax Filing Extension?
To request a six-month estate tax filing extension, Form 4768 will need to be submitted before the original 706 due date passes. In addition, the estimated tax amount must be paid in full before the original due date.
Six-month extensions are automatically granted by the IRS as long as these two rules have been followed by the executor of the estate.
When are Form 706 Payments Due?
Form 706 taxes owed to the IRS are due within nine months of the decedent’s death. Executors can pay in full or request installment payments. Estate taxes can be paid electronically using EFTPS (Electronic Federal Tax Payment System).
Late payments for Form 706 taxes owed will accrue interest and penalties similar to other tax debts owed to the IRS.
What Happens If You Don’t File Form 706?
The IRS will send a notice to the executor stating they need to file a 706. Neglecting to file Form 706 may result in penalties, levies, and even criminal proceedings.
If you receive a notice from the IRS about failing to file Form 706 and you do not believe you need to file it, you can appeal the decision. To dispute, simply follow the appeal directions in your notice.
Does the IRS Offer Tax Relief for Estate Back Taxes?
Executors and heirs could be eligible for tax relief if estate taxes owed cannot be paid in full due to qualifying circumstances. The IRS may accept a lump sum cash offer that allows you to pay 20% up front, followed by five or fewer installment payments on the remaining estate tax balance.
An Offer in Compromise is another way to pay lower estate taxes and in monthly installments.
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