What Form 706-NA Is For

Form 706-NA—officially titled "United States Estate (and Generation-Skipping Transfer) Tax Return Estate of nonresident not a citizen of the United States"—is the federal tax form used to calculate and report estate taxes owed when someone who was neither a U.S. citizen nor a U.S. resident at death owned property located in the United States.

Unlike Form 706 (used for U.S. citizens and residents), Form 706-NA applies specifically to nonresident alien decedents. The form computes two types of taxes: the estate tax on the transfer of U.S.-situated assets, and the generation-skipping transfer (GST) tax on certain transfers to grandchildren or more remote descendants.

Think of it this way: if a foreign national who lived abroad owned a vacation home in Florida, stocks in U.S. companies, or other American assets, their estate would likely need to file Form 706-NA. The estate tax is imposed on transferring the decedent's U.S. property to heirs, not on what the heirs receive. This is an important distinction—the estate itself owes the tax before assets are distributed.

The form also serves another critical purpose: it documents asset values for beneficiaries. Under "consistent basis reporting" requirements, estates must report to the IRS and beneficiaries the estate tax value of each asset using Form 8971 within 30 days of filing Form 706-NA. This establishes the beneficiaries' tax basis when they later sell inherited property.

When You’d Use It (Late/Amended Filings)

Standard Filing Deadline

Form 706-NA must be filed within 9 months after the decedent's date of death. For example, if someone passed away on March 15, 2020, the return would be due by December 15, 2020. This deadline applies regardless of when probate proceedings are completed or when the estate is settled.

Filing Threshold

You only need to file if the decedent's U.S.-situated assets, combined with the gift tax specific exemption (for gifts made between September 9 and December 31, 1976) and adjusted taxable gifts (taxable gifts made after December 31, 1976), exceed $60,000. This $60,000 threshold is considerably lower than the multi-million-dollar exemption available to U.S. citizens and residents.

Extensions

If you cannot meet the 9-month deadline, you can request an automatic 6-month extension using Form 4768 (Application for Extension of Time To File). This extends the filing deadline but not the payment deadline—any tax owed is still due within 9 months, and interest accrues on late payments. Executors located outside the United States who have already received the 6-month extension may apply for an additional extension by filing a second Form 4768 with a written explanation.

Late or Amended Returns

If you discover errors or omissions after filing, you should file a supplemental Form 706-NA. Write "Supplemental Information" across the top of page 1 and attach copies of pages 1-4 from the original return. Common reasons for amendments include discovering additional U.S. assets, correcting valuations, or claiming overlooked deductions. Remember, penalties apply for late filing unless you can demonstrate reasonable cause.

Key Rules for 2020

The $60,000 Filing Threshold

For 2020, the critical number to remember is $60,000. If the total value of U.S.-situated assets (plus any adjusted taxable gifts and gift tax exemptions) exceeded this amount at death, Form 706-NA must be filed. Unlike the filing threshold for U.S. citizens (which was $11.58 million in 2020), this $60,000 threshold is not indexed for inflation and has remained constant for years.

What Counts as U.S.-Situated Property

Understanding what property is "situated" in the United States is crucial. Generally, this includes:

• Real estate physically located in the U.S. (homes, land, commercial property)
• Tangible personal property physically in the U.S. (cars, jewelry, artwork, furniture)
• Stock in U.S. corporations (regardless of where stock certificates are physically located)
• Debt obligations of U.S. persons, corporations, or government entities
• Business interests in U.S. trade or businesses

What Does NOT Count

Important exceptions include:

• Bank deposits not connected to a U.S. trade or business (treated as outside the U.S.)
• Certain debt obligations issued after July 18, 1984, eligible for tax exemption under section 871(h)(1)
• Life insurance proceeds (generally treated as property outside the U.S.)
• Stock in foreign corporations
• Works of art on loan to nonprofit public galleries or museums for exhibition

The Unified Credit

For 2020, nonresident non-citizens received only a $13,000 unified credit against estate tax—dramatically less than the multi-million-dollar exemption for U.S. persons. However, tax treaties with certain countries (including Canada, the United Kingdom, Germany, France, Italy, Japan, and others) may provide a proportional credit based on the ratio of U.S. assets to worldwide assets, potentially reducing the tax burden significantly.

Tax Rates

Estate tax rates for 2020 ranged from 18% to 40%, calculated using Table A—Unified Rate Schedule from the Form 706 instructions corresponding to the decedent's date of death. The actual rate depends on the size of the taxable estate.

Special 2020 Considerations

Forms and addresses changed over the years, so ensure you use the November 2020 revision of Form 706-NA and its instructions. As of July 2019, all Forms 706-NA are filed in Kansas City, Missouri, not at previous addresses.

Step-by-Step Filing Guide (High Level)

Step 1: Determine if Filing is Required

Calculate the total fair market value of all U.S.-situated assets at the date of death. Add any gift tax specific exemption and adjusted taxable gifts. If the total exceeds $60,000, you must file.

Step 2: Identify the Executor

The executor (personal representative, administrator, or administratrix) is responsible for filing. If no executor was appointed, every person with actual or constructive possession of the decedent's U.S. property must file. Document the executor's authority with certified copies of court orders or the will.

Step 3: Gather Required Documentation

Before starting the form, collect:

• Certified copy of the death certificate
• Certified copy of the will (if the decedent died testate)
• Appraisals and valuations for all U.S. property
• U.S. gift tax returns filed by the decedent
• Balance sheets for closely held businesses or inactive corporations
• Foreign death tax returns or estate inventories (if claiming deductions)
• Form 706 and its instructions (you'll need certain schedules from Form 706)

Step 4: Obtain Necessary Identification

On line 2 of Part I, enter the decedent's Social Security Number (if applicable) or Individual Taxpayer Identification Number (ITIN, only if previously used on other U.S. tax returns). If the decedent has neither, leave line 2 blank—the IRS will assign an Internal Revenue Service Number (IRSN).

Step 5: Complete Schedule A (U.S. Assets)

List all assets located in the United States with detailed descriptions. For stocks, include the corporation name, number of shares, CUSIP number, and quotations. For real estate, provide complete addresses and appraisals. Value everything at fair market value as of the date of death, unless you elect alternate valuation (valuing property as of six months after death, which can only be elected if it decreases both the gross estate value and the net tax due).

Step 6: Complete Schedule B (Taxable Estate)

Calculate deductions to arrive at the taxable estate. Allowable deductions include funeral expenses, administration expenses, claims against the estate, unpaid mortgages, and certain charitable and marital deductions (with restrictions). You must provide detailed documentation for each deduction, including certified copies of foreign death tax returns to prove the worldwide estate value.

Step 7: Calculate the Tax (Part II)

Use the Unified Rate Schedule from Form 706 instructions to compute the tentative tax. Apply the $13,000 unified credit (or treaty-based credit if applicable). Deduct any credits for state death taxes, federal gift taxes, or foreign death taxes to arrive at the net estate tax due.

Step 8: Address GST Tax if Applicable

If the estate involves generation-skipping transfers (transfers to grandchildren or more remote descendants), complete Schedule R from Form 706 and calculate additional GST tax.

Step 9: Sign, Date, and File

The executor must sign under penalties of perjury. Attach all required schedules, supporting documentation, and translations of foreign-language documents. Mail to:
Department of the Treasury
Internal Revenue Service Center
Kansas City, MO 64999

Step 10: Pay Any Tax Due

Include payment by check or money order payable to "United States Treasury" in U.S. dollars. The IRS cannot accept single checks of $100 million or more; larger amounts must be split across multiple checks.

Common Mistakes and How to Avoid Them

Mistake #1: Missing the Filing Deadline

Even with good intentions, executors often underestimate how long it takes to gather documentation, obtain appraisals, and complete the complex calculations.
How to avoid it: Begin the process immediately after death. Request a 6-month extension using Form 4768 early, even if you think you might finish on time. Extensions are automatic and provide breathing room. Remember: the extension is for filing only—payment is still due within 9 months.

Mistake #2: Incorrectly Determining What Property is U.S.-Situated

Many executors misclassify assets, either including property that shouldn't be reported or omitting property that should be. For example, they might report life insurance proceeds (generally not U.S.-situs) or forget that stock in a U.S. corporation owned through a foreign brokerage is still U.S. property.
How to avoid it: Carefully review the location rules in the Form 706-NA instructions. When in doubt, consult a tax professional familiar with international estate tax. Bank deposits not connected to U.S. business activities are particularly tricky—these are treated as situated outside the U.S., but many people assume all U.S. bank accounts must be reported.

Mistake #3: Failing to Document Deductions Properly

The IRS requires specific documentation for deductions, particularly the value of assets located outside the U.S. Many executors claim deductions on Schedule B lines 2 and 4 without attaching certified foreign death tax returns or itemized expense schedules.
How to avoid it: Attach certified copies of foreign death tax returns (or estate inventories if no foreign return was filed), plus detailed itemized schedules for every expense and claim, including creditor names and the nature of each expense. State death tax deductions require certificates from the taxing state showing total tax, discounts, penalties, and payment dates.

Mistake #4: Overlooking Treaty Benefits

Numerous tax treaties can dramatically reduce or even eliminate U.S. estate tax through proportional credits or exemptions, but executors must affirmatively claim these benefits and attach Form 8833.
How to avoid it: Research whether a treaty exists between the decedent's country of citizenship/residence and the U.S. Include specific treaty citations on Form 8833, attach the alternate computation, and provide copies of foreign estate tax returns to substantiate the worldwide estate value.

Mistake #5: Using Incorrect Valuation Methods

"Fair market value" means the price between a willing buyer and willing seller, neither under compulsion and both with reasonable knowledge. Many executors use acquisition cost, probate values, or forced sale prices instead.
How to avoid it: Obtain professional appraisals for real estate, closely held businesses, and unique assets. For publicly traded securities, use the Instructions for Form 706, Schedule B rules (typically the mean between highest and lowest selling prices on the valuation date). Don't rely on property tax assessments or outdated appraisals.

Mistake #6: Neglecting the Consistent Basis Reporting Requirement

The estate must file Form 8971 and provide Schedule A copies to beneficiaries within 30 days of filing Form 706-NA (or earlier if the return is filed late). Many executors file Form 706-NA but forget Form 8971.
How to avoid it: Set a reminder 30 days from your Form 706-NA filing date. Form 8971 reporting is mandatory and ensures beneficiaries use the correct tax basis when they later sell inherited property.

Mistake #7: Incomplete Supporting Documentation

Executors frequently file returns without attaching required schedules from Form 706, balance sheets for closely held corporations, or English translations of foreign documents.
How to avoid it: Create a filing checklist from the instructions. If claiming marital or charitable deductions, you must attach Schedule M or Schedule O from Form 706. For any non-English documents, attach certified English translations.

What Happens After You File

Initial Processing (First 3–6 Months)

After mailing Form 706-NA to Kansas City, the IRS processes the return, assigns it to the Master File system, and checks for mathematical errors and missing information. You may receive automated notices about math errors or requests for missing documentation during this phase. The IRS typically takes several months to complete initial processing.

No Automatic Closing Letters

The IRS no longer automatically issues Estate Tax Closing Letters (Letter 627). Instead, executors must request them, and the IRS recommends waiting at least 9 months after filing before requesting. Many executors and beneficiaries find this frustrating, as closing letters provide peace of mind that the IRS has accepted the return.

Alternative to Closing Letters

The IRS now encourages using account transcripts in lieu of closing letters. Authorized tax professionals can access transcripts online through the Transcript Delivery System (TDS), or anyone can request transcripts by mail using Form 4506-T. Transcripts reflect transactions including acceptance of Form 706-NA and completion of examinations. Financial institutions, courts, and other entities generally accept transcripts as proof of estate tax compliance.

Examination/Audit Selection (Variable Timeline)

The IRS may select returns for examination (audit) to verify valuations, deductions, and calculations. Estate tax examinations typically begin within 12–24 months of filing but can occur anytime within the statute of limitations (generally three years from filing, but longer if substantial understatement exists). Not all returns are audited—selection depends on various factors including estate size, types of assets, and red flags.

During an Examination

If selected for audit, you'll receive a letter specifying what information the IRS needs. Revenue agents will review documentation, may request additional appraisals or explanations, and might propose adjustments. You don't have to be present during examinations unless specific questions require your input—most executors authorize tax professionals to handle audits by filing Form 2848 (Power of Attorney).

Resolution

Examinations conclude in one of several ways:

• No change: The IRS accepts the return as filed
• Agreed assessment: You agree to proposed adjustments, sign Form 870, and pay additional tax plus interest
• Disagreed assessment: You disagree and can appeal through IRS Appeals or Tax Court

Refund Claims

If you discover you overpaid estate tax, you can file a supplemental Form 706-NA requesting a refund, but you must generally claim refunds within four years of filing. If you later recover state death taxes for which you claimed a deduction, you must notify the IRS within 30 days of receiving the refund.

Post-Filing Obligations

Remember to file Form 8971 (if you haven't already) and distribute Schedule A copies to beneficiaries. If the estate sells U.S. real property, it must file Form 1040-NR (nonresident income tax return) reporting capital gains, and buyers must withhold 15% of the amount realized using Form 8288.

FAQs

Q1: My relative who lived in Canada owned $50,000 worth of U.S. stocks. Do I need to file Form 706-NA?

No, probably not. Since $50,000 is below the $60,000 filing threshold (and assuming no adjusted taxable gifts or gift tax exemptions), you wouldn't be required to file. However, check whether the Canada-U.S. tax treaty provides additional benefits—the treaty offers special marital credits and small estate exemptions (for worldwide estates under $1.2 million) that might benefit the estate even if not required to file. When in doubt, consult a cross-border tax advisor.

Q2: The decedent was a green card holder who lived in the U.S. for years but returned to their home country before death. Which form do I use?

This depends on "domicile"—where the decedent intended to live permanently. If they merely visited their home country temporarily while maintaining U.S. domicile, use Form 706 (the regular estate tax return). If they surrendered their green card, established permanent residence abroad, and had no intention of returning to the U.S., use Form 706-NA. Long-term U.S. residents (green card holders for at least 8 of the last 15 years) who expatriated before June 17, 2008, may be subject to special rules under section 2107. This determination is fact-intensive and often requires professional help.

Q3: Can a nonresident non-citizen's surviving spouse benefit from portability of the deceased spousal unused exclusion (DSUE)?

No. Portability—which allows surviving spouses of U.S. citizens to use their deceased spouse's unused estate tax exemption—is not available when the deceased was a nonresident non-citizen. This is one of the significant disadvantages for nonresident estates compared to U.S. citizen estates.

Q4: We're expecting a large estate tax bill but the estate is illiquid—all the value is in a vacation home. Can we pay over time?

Possibly. While Form 706-NA doesn't prominently discuss installment payment options, section 6161 allows extensions of time to pay if the estate shows undue hardship (though interest continues accruing). Section 6166 allows certain estates with closely held business interests to pay tax in installments over up to 14 years, but it's unclear whether this applies to nonresident estates—consult a tax attorney. Consider whether beneficiaries can loan money to the estate, whether the property can be mortgaged, or whether life insurance exists to provide liquidity.

Q5: The decedent's country had an estate or inheritance tax too. Can we get credit for foreign death taxes?

Yes, potentially. You may claim a credit for foreign death taxes on Schedule P of Form 706 (which you attach to Form 706-NA), but the credit is limited by a complex formula preventing double benefit. The credit cannot exceed the lesser of the foreign tax actually paid or the U.S. tax attributable to property also taxed by the foreign country. Tax treaties often provide additional benefits—some treaties limit U.S. tax based on proportional worldwide estate values or provide credits that effectively eliminate double taxation. Always attach treaty-benefit computations if claiming treaty relief.

Q6: I filed Form 706-NA on time but forgot to claim a deduction for funeral expenses. Can I amend the return?

Yes. File a supplemental Form 706-NA with "Supplemental Information" written across the top of page 1. Attach pages 1-4 from your original return and explain the changes. Include documentation for the funeral expenses (receipts, invoices, proof of payment). You must generally claim refunds within four years of filing the original return. While the IRS may take several months to process supplemental returns, it's better to file amendments than forfeit legitimate deductions.

Q7: How long should we keep records after filing Form 706-NA?

Keep all records for at least four years after filing—the typical statute of limitations for the IRS to assess additional tax or for you to claim refunds. However, if there's substantial understatement (more than 25% of the reported estate), the IRS has six years to assess additional tax. If fraud or no return was filed, there's no statute of limitations. For practical purposes, keep original appraisals, foreign death tax returns, deeds, and core documentation permanently. These documents establish beneficiaries' tax basis and may be needed decades later when inherited property is sold.

Final Thoughts

Form 706-NA represents a complex intersection of U.S. tax law and international estate administration. The $60,000 filing threshold seems low by modern standards, and the limited $13,000 unified credit means even modest U.S. asset holdings can trigger significant tax liability for nonresident non-citizens. However, tax treaties, proper planning, and careful documentation can substantially reduce or eliminate these taxes.

Given the complexity and high stakes, most executors benefit from hiring cross-border estate tax professionals familiar with both U.S. requirements and the decedent's home country's laws. The cost of professional help is typically deductible as an administration expense and is almost always worth it to avoid costly mistakes, missed treaty benefits, or IRS examinations.

For the most current information, always visit IRS.gov/Form706NA and review the specific instructions for the year of death, as tax laws and filing procedures continue to evolve.

Sources

• IRS Form 706-NA Instructions (November 2020 Revision)
• IRS: About Form 706-NA
• IRS: Estate Tax for Nonresidents Not Citizens of the United States
• IRS: Frequently Asked Questions on Estate Taxes for Nonresidents Not Citizens