Estate Tax Closing Letters No Longer to be Automatically Provided by IRS

In line with IRS Commissioner John A. Koskinen's infamous retort of "doing less with less" in response to Congress' slashing of his budget, the IRS announced last week that it will no longer issue estate tax closing letters for estate tax returns filed on or after June 1, 2015.  Providing such letters automatically is an important service to taxpayers.  Now, more paperwork is necessary in order to obtain the closing letter.  The IRS says that it will issue the letters upon request, but that taxpayers must wait at least four months after filing the estate tax return before making the request.  This places an unnecessary burden on the public and increases government inefficiency.

An estate tax closing letter provides the assurance the decedent's personal representative (PR) needs to close the estate and distribute the estate assets to the beneficiaries.  Distributing assets before such letter is received increases the PR's risk of personal financial liability for any unexpected additional tax.  So the IRS' new policy will only serve to delay the distribution of assets to estate beneficiaries or else increase the PR's personal liability if distributed without the letter.

Update

The IRS has created another option to receive confirmation that the estate tax return was accepted as filed or that any audit has been completed.  The IRS has added Code 421 to the account transcript of the estate to indicate acceptance of the estate tax return.  If that code does not appear on the transcript, the tax return is still under review.  The IRS advises the PR to wait six months from the date of filing the estate tax return before requesting a copy of the transcript.  For more information on this procedure, click here.