What Form 706-NA Is For
Form 706-NA (2019) is used to report and calculate the United States estate tax and generation-skipping transfer tax for individuals who were not citizens or residents of the United States at the time of death. This estate tax return applies to a decedent’s estate that includes U.S.-situated assets, such as real property, tangible personal property, or intangible assets located in the country. The Internal Revenue Service requires this form to determine the taxable estate, compute estate and gift taxes, and verify whether any estate tax liability or GST tax is owed.
When You’d Use Form 706-NA
Executors must file Form 706-NA if the value of the gross estate located in the United States, plus adjusted taxable gifts and any gift tax specific exemption, exceeds the $60,000 filing threshold. The tax form is due nine months after the decedent’s date of death. Estates may request a six-month extension through Form 4768; however, this extension does not postpone the due date for payment. If errors are discovered later, an amended estate tax return may be filed. Executors may also file late with reasonable cause to avoid penalties, which the Internal Revenue Service may approve under its tax laws.
Key Rules or Details for 2019
- Filing threshold: Estates of nonresident individuals must file when the United States estate value exceeds $60,000, including adjusted taxable gifts and lifetime transfers.
- Unified credit exemption: The unified credit exemption equals $13,000, protecting approximately $60,000 in value from estate taxation.
- Property location: Real property and tangible personal property physically in the U.S. are included for estate tax purposes. Intangible assets located abroad are excluded for income tax purposes.
- Alternate valuation date: Executors may elect to use an alternate valuation date six months after the decedent’s death if it lowers both the gross estate and estate tax liability.
- Treaty benefits: Under an applicable treaty, such as the Canada income tax treaty or other death tax treaty, certain estates may be eligible to claim higher credits or reduced tax rates.
- Allowable deductions: Administration expenses, debt obligations, and claims against the estate are deductible if related to U.S.-situated property.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-Step (High Level)
Step 1: Determine Filing Requirement
Executors must compute the estate value by identifying all gross estate property located in the United States. If the total, including adjusted taxable gifts, exceeds $60,000, a Form 706-NA filing is required under federal tax laws.
Step 2: Gather Documentation
Collect certified death certificates, copies of wills, real property tax act records, stock certificates, and documentation of any foreign corporation holdings or companies' debt obligations. Executors should maintain detailed records to support the tax return paperwork.
Step 3: Identify and Value Assets
Each item in the decedent’s gross estate should reflect fair market value as of the decedent’s death or on the elected alternate valuation date. Tangible property and intangible assets located in the U.S. must be clearly listed with supporting appraisals to calculate tax liabilities accurately.
Step 4: Calculate Deductions and Credits
List allowable deductions such as administration expenses, funeral costs, and qualified conservation easement exclusion amounts. Estates may also claim a marital deduction if the surviving spouse is a U.S. citizen or establish a qualified domestic trust to defer estate taxation. Apply the unified credit exemption and any benefits available under an estate tax treaty to reduce estate tax owed.
Step 5: File and Pay
Send the completed tax return and payment to the Internal Revenue Service, Attn: Estate Tax, using private delivery services when necessary. Executors should compute estate taxes and include payment by check or money order to avoid additional penalties and interest.
Step 6: File Supplemental Forms
File Form 8971 to report asset values distributed to beneficiaries for estate and gift tax consistency. Registered tax professionals or estate tax return preparers can help ensure accuracy and compliance with tax laws and regulations.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Including incorrect property: Executors sometimes include worldwide estate assets or exclude U.S. holdings. To avoid this, confirm each item’s location and use fair market value for U.S.-based property only.
- Missing executor authorization: Failing to include certified proof of appointment can delay processing. Attach legal documents confirming the executor's authority to ensure the Internal Revenue Service accepts the return.
- Incorrect valuations: Estates often misstate the death value or fair market value. Use qualified appraisers for tangible property and document valuation methods to support the taxable estate calculation.
- Ignoring treaty provisions: Executors may overlook available estate tax treaties. Review any applicable treaty, such as a death tax treaty, to determine whether exemptions or reduced rates apply.
- Misunderstanding extensions: Some assume an extension delays payment. Always pay the estate tax owed within nine months, even if a filing extension is granted, to prevent interest from accruing.
- Omitting Form 8971: Forgetting this companion form leads to penalties. To remain compliant, submit it within 30 days of filing the primary estate tax return.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
After submission, the Internal Revenue Service reviews the estate tax return to verify figures and attachments. If everything is complete, processing continues until any estate tax liability is confirmed. Estates must specifically request a closing letter for the estate tax about six to nine months after filing. This letter provides confirmation that the decedent’s taxable estate was reviewed and the estate tax purposes completed. If overpayment occurred, the IRS issues refunds with interest. Executors should keep all records until they receive the official closing confirmation.
FAQs
Do I need to file Form 706-NA if no estate tax is due?
If the decedent’s estate includes U.S. assets exceeding $60,000, filing is required even when no estate tax liability remains after allowable deductions or exemptions.
What is the difference between Form 706 and Form 706-NA for estate and generation-skipping transfer purposes?
Form 706 covers estates owned by U.S. citizens and residents, while Form 706-NA applies to those who are not citizens or residents. The latter focuses only on U.S.-situated assets and generation-skipping transfer tax requirements.
How does a death tax treaty affect my estate tax exemption?
An applicable death tax treaty can increase the unified credit exemption, reduce estate tax owed, or adjust taxable estate calculations for eligible foreign nationals. Executors should review each treaty’s terms before filing.
Can debt obligations and administration expenses be deducted from the taxable estate?
Debt obligations and administration expenses are allowable deductions if they relate directly to property in the United States estate and are properly documented on the estate tax return.
What does an estate tax closing letter confirm?
The estate tax closing letter confirms that the Internal Revenue Service has reviewed and accepted the estate tax return. It establishes the final estate tax liability and permits executors to distribute assets safely and securely.
How should estate tax return preparers compute estate value and fair market valuations?
Preparers must identify gross estate assets, apply fair market value at the decedent’s death, and include all adjusted taxable gifts. Using these figures ensures proper calculation of estate tax liability under U.S. estate taxation rules.
For more resources on filing or understanding prior-year IRS forms, visit our guide on Estate and Gift Tax Reporting.
