What Happens after Estate Form 706 Is Complete? - dummies

What Happens after Estate Form 706 Is Complete?

The IRS will issue Letter 627, Estate Tax Closing Letter if it accepts your estate tax return (Form 70) as filed, or if you and the IRS reach an agreement after a 706 audit. The closing letter, although not a formal agreement, shows the IRS’s final determination of estate tax. But both the IRS and the estate’s executor can reopen a case under certain circumstances, even after the closing letter is received.

After issuing Letter 627, the IRS isn’t likely to reopen the case, but it retains the option if evidence of fraud, malfeasance, collusion, concealment, or misrepresentation of a material fact surfaces.

The IRS may also reopen a case if it discovers a clearly defined substantial error based on an established IRS position existing at the time of the previous examination (if it realizes it missed something it clearly should have caught), or if other circumstances exist that indicate failure to reopen would be a serious administrative omission.

An executor may reopen a case if the period for assessment (three years from the filing of the 706, and six years from filing if unreported assets constitute 25 percent or more of the gross estate stated in the return as filed) hasn’t expired.

You want to reopen a case if you subsequently discover assets of the decedent. You may also file a claim for refund.