What Form 706 (2010) Is For
Form 706 is the federal estate tax return used to report the decedent’s estate and calculate the estate tax owed after a decedent’s death. It applies when the total value of the decedent’s assets and lifetime gifts exceeds the federal estate tax exemption. Executors file this IRS form to report the gross estate, claim deductions, and determine taxable estate liability under the Internal Revenue Code. The estate must also account for generation-skipping transfer taxes and other estate administration responsibilities.
When You’d Use Form 706 (2010)
Executors must file when the decedent’s gross estate, plus adjusted taxable gifts, exceeds the estate tax exemption. The filing requirement applies to U.S. citizens, residents, and certain nonresident aliens who own U.S. property. The filing deadline is nine months after the decedent’s death, though an automatic six-month extension can be requested. Late or amended tax returns may be filed if errors arise or additional information becomes available. Executors often file pursuant to a revenue procedure to maintain compliance with the United States Treasury and Internal Revenue Service.
Key Rules or Details for 2010
- Federal Estate Tax Exemption: Estates of decedents who died in 2010 were eligible for a $5 million exemption, allowing most estates to avoid federal estate tax liability.
- Deceased Spousal Unused Exclusion (DSUE Amount): A surviving spouse could use a deceased spouse’s unused exemption, known as the DSUE amount, to increase their future estate tax exemption.
- Elect Portability Option: Executors can elect portability by filing Form 706 promptly, allowing the deceased spouse's unused exclusion to be transferred to the surviving spouse for later use.
- Fair Market Value of Assets: The fair market value of each asset at the decedent’s date of death determines the taxable base. Proper asset valuations help calculate estate taxes accurately and avoid disputes.
- Estate and Generation-Skipping Transfers: The 2010 estate and generation-skipping tax rate was 0%, allowing some estates to benefit from reduced taxation on wealth transfers.
- Key Deadlines and Extensions: The due date was generally nine months after death; however, executors could request a six-month extension by filing before this deadline.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-Step (High Level)
Step 1: Determine the Filing Requirement
Executors must first determine whether the gross estate plus taxable gifts exceeds the specific exemptions allowed. If the total value surpasses the federal estate tax exemption, a Form 706 filing is mandatory.
Step 2: Gather Executor Documentation
The executor should collect proof of appointment, including court documents, the will, or letters of authority, as applicable. Each form must include the social security number and the decedent’s date of death.
Step 3: Value the Decedent’s Assets
Executors must determine the fair market value of the decedent’s assets, including real estate, securities, and insurance. Accurate asset valuations ensure proper tax calculations and compliance.
Step 4: Complete and File the Form
Prepare all relevant schedules for reporting property, debts, and deductions. Mail the completed filing form with a check payable to the United States Treasury using a private delivery service, or send it to the official Treasury Internal Revenue Service location at Pershing Road, Kansas City.
Step 5: Pay Estate Taxes or Request Extension
Executors must pay estate taxes by the original due date. If needed, they can file Form 4768 for a six-month extension. Payments must be properly paid and documented to avoid tax bills.
Step 6: Elect Portability if Applicable
Suppose the decedent was part of a married couple. In that case, the executor can elect portability to transfer the deceased spouse’s unused exclusion to the surviving spouse, preserving the deceased's unused exclusion for future use.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Undervalued Assets: Estates sometimes misstate the fair market value of property, resulting in tax adjustments. Always obtain certified appraisals to ensure that asset valuations are accurate and accepted by the relevant authorities.
- Missed Filing Deadlines: Executors who miss the nine-month filing deadline face penalties. To avoid issues, request an automatic six-month extension early by submitting the proper filing forms and documentation.
- Incorrect Deductions: Overstated or missing deductions can cause IRS delays. Executors should consult a financial advisor or tax professional to verify that all deductions are valid and properly supported.
- Failure to Elect Portability: Executors often overlook the opportunity to elect portability, thereby forfeiting the deceased spouse's unused exclusion. Always file on time to preserve the due amount for the surviving spouse.
- Incomplete Documentation: Missing estate administration records or appraisals delay approval. Confirm that every attachment matches the IRS checklist before submitting it to the Internal Revenue Service.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
Once filed, the Internal Revenue Service reviews the estate tax return for completeness and accuracy. If information is missing, the IRS contacts the executor for clarification. Executors can request a closing letter for the estate tax upon acceptance, which verifies that the estate's tax obligations have been satisfied. This letter is required for property transfers, financial institutions, and future estate income tax return filings. Keep all documents related to the decedent’s estate permanently to assist heirs and prevent future tax bills.
FAQs
Do I need to file Form 706 (2010) if no estate tax is due?
You must file if the gross estate plus lifetime gifts exceeds the federal estate tax exemption, even when deductions eliminate the taxable estate.
How is fair market value used in calculating the estate tax?
The fair market value at the decedent’s date of death determines taxable amounts. Accurate appraisals are crucial for calculating estate taxes and preventing underreporting.
What is the due date for Form 706 (2010)?
The due date is nine months after death, with a possible six-month extension available by filing before the original deadline expires.
Can I elect portability for a deceased unused exclusion (DSUE)?
Yes, executors can elect portability to transfer the deceased spouse's unused exclusion to the surviving spouse, preserving the due amount for later estate use.
How does the estate tax closing letter work?
After review, the IRS issues an estate tax closing letter confirming completion. Executors should retain it for estate administration and future tax return verification.
What if the decedent was not a citizen or resident?
Non-resident aliens must file if they own U.S. assets. The United States Estate Tax Return applies only to property within the United States.
Where should I send payment for Form 706?
Make the check payable to the United States Treasury and send it by private delivery service to the IRS office at Pershing Road, Kansas City.
For more resources on filing or understanding prior-year IRS forms, visit our guide on Business Income Tax Forms.
