IRS Is Proposing a User Fee for Estate Tax Closing Letter

Executors and personal representatives of estates of decedents can be held personally liable for distributing or applying estate assets when there are unpaid estate taxes due, if the IRS does not get paid. When an estate tax return is filed, the final amount of estate taxes due is not known until either the statute of limitations expire, or there is an audit (possibly followed by ongoing dispute, resolution through Appeals, and/or litigation). The estate fiduciaries are thus in the dark about whether or when an adjustment to the estate taxes will be forthcoming, or if the IRS has accepted an estate tax return as filed. This is unfair to the fiduciaries, and the beneficiaries, since a prudent fiduciary will need to hold back on distributions until the tax amount is more certainly known.

So as to assist the fiduciaries in determining if tax is or will be due, when an estate tax return is filed the IRS has traditionally issued an estate tax closing letter when an estate tax return has been filed. This is generally issued after the IRS’ review of the return and determination not to audit or after completion of post-audit procedures or litigation. . .