For years, probate practitioners relied upon a
Federal Estate Tax Closing Letter (Closing Letter) as evidence that the IRS has accepted a Federal Estate Tax Return (Form 706) as filed and that the federal tax liabilities of the estate were satisfied. Upon receipt, the Closing Letter provided the estate administrator (
Personal Representative, Executor, etc..) with an assurance to proceed with closing out the estate administration process. In many situations, a Closing Letter was required to satisfy state law probate proceedings. Except in extreme circumstances, such as fraud, substantial error by the Internal Revenue Service (IRS) or when a failure to reopen would be a serious administrative omission, the IRS will not reopen or reexamine an estate tax return when a closing letter has been issued.
Effective on June 1, 2015, the IRS changed its policy and ceased issuing a Closing Letter to the taxpayer’s representative. Instead, the taxpayer’s representative will receive a closing letter only upon affirmative request.
To avoid the confusion created by this policy change, the IRS recently issued
Notice 2017-12, as guidance on methods to confirm that the IRS has closed its examination of an estate tax return. Notice 2017-12 officially confirms an account transcript issued by the IRS is a valid substitute for an estate tax closing letter, so long as the transcript bears the transaction code of 421 (that Form 706 has been accepted as filed and an examination has been concluded).
An account transcript can be obtained online through the IRS’s Transcript Delivery Service or by fax or mail through filing Form 4506-T. Account transcripts will only be issued to an estate representative when a properly executed Form 2848 Power of Attorney or Form 8821 Tax Information Authorization is already on file. Alternatively, a Closing Letter can be obtained by calling (866) 699-4083 and providing the IRS the following information: (i) the name of the decedent; (ii) the decedent’s social security number; and (iii) the date of death. The closing letter will then be issued to the estate administrator at the address of record.
