Canadian taxpayers are accustomed to receiving a notice of assessment after filing a tax return. In the federal context, a aotice of assessment, is a statement from the Canada Revenue Agency notifying the taxpayer of among other items the amount of tax they owe, if any, the amount of tax already paid, if any, and tax credits received.
What if that return was a U. S. estate tax return, Form 706, to report an interest in U. S. situs property?
The Internal Revenue Service (IRS) will issue an Estate Tax Closing Letter after a federal estate tax return has been reviewed and accepted by the IRS. In states that collect a state estate tax or state inheritance tax, the state taxing authority will issue an estate tax or inheritance tax closing letter in order to indicate the state estate or inheritance tax return has been reviewed and accepted by the state taxing authority.
According to the IRS website, heirs can expect a closing letter to be issued within four to six months from the date that Form 706 is filed if the return is without errors or special circumstances. The letter allows Executors to close out the estate administration process.
In a June 16, 2015 update to its website, the IRS noted that for all estate tax returns filed on or after June 1, 2015, closing letters would only be issued when requested by the taxpayer. Previously, the letters were sent automatically. Representatives are asked to wait at least four months after the return has been filed to request a closing letter.
Trustees should be advised to wait for the appropriate notice where multiple taxing authorities are involved before completing the estate administration process.