What IRS Form 706 (2018) Is For

Form 706 is the United States Estate (and Generation-Skipping Transfer) Tax Return used by executors to report estate tax and generation-skipping transfer (GST) tax for deceased U.S. citizens or residents who died in 2018. The form must be filed if the gross estate plus adjusted taxable gifts and specific exemption exceeds $11,180,000, or if the executor chooses to make a portability election to transfer the deceased spousal unused exclusion (DSUE) amount to a surviving spouse, regardless of the estate's size (IRS Instructions for Form 706, 2018).

When You'd Use Form 706 for 2018 (Late or Amended Filing)

You might file Form 706 for 2018 late or as an amended return in several scenarios: when you've received IRS notices about an unfiled estate tax return, when you discovered errors on an originally filed return that affect tax liability, when you need to make a late portability election (potentially eligible under Revenue Procedure 2017-34 if filed within two years of death), or when you're correcting asset valuations after an audit or additional information becomes available. Late filers may also need to address situations where the estate's value crossed the filing threshold after further asset discovery, or when beneficiaries received distributions that weren't properly reported on the original return.

Key Rules Specific to 2018

The 2018 tax year featured a significantly increased basic exclusion amount of $11,180,000 per individual, up from $5,490,000 in 2017 due to the Tax Cuts and Jobs Act (IRS Estate Tax page). This dramatic increase meant many estates that would have required filing in prior years were no longer subject to estate tax filing requirements unless making a portability election. For 2018 decedents, executors filing late portability elections could potentially use the relief provisions under Revenue Procedure 2017-34, allowing filing up to January 2, 2018, or the second anniversary of death, whichever was later (IRS Instructions for Form 706, 2018). The basic credit amount for 2018 was $4,417,800, and the top tax rate remained at 40%.

Step-by-Step (High Level)

• Gather records and transcripts: Collect all asset documentation, prior gift tax returns, and request estate tax account transcripts from the IRS if needed
  
  
• Complete Form 706 (2018 version): Use the correct year's form and instructions, available at IRS.gov/prior-year-forms-and-instructions
  
  
• Attach required schedules: Include all applicable schedules (A through R-1) and supporting documentation such as death certificates, appraisals, and copies of trust documents
  
  
• Submit payment: Include full payment or arrange for installment agreement using Form 9465 if needed
  
  
• Mail or file: Send completed return to the address specified in the 2018 instructions, or check if electronic filing is available through approved software
  
  
• Keep copies: Retain copies of all documents, schedules, and proof of mailing or electronic submission confirmation
  
  

Common Mistakes and How to Avoid Them

• Incomplete Recapitulation: Enter a value (even zero) on every line of the Recapitulation section to avoid processing delays and potential penalties
  
  
• Missing identification numbers: Include CUSIP numbers for all stocks and bonds, and Employer Identification Numbers (EINs) for trusts, partnerships, and closely held entities
  
  
• Forgetting required schedules: Always file Schedule F (other miscellaneous property) and Schedule D (insurance) even if no values are reported, as these are mandatory attachments
  
  
• Incorrect portability elections: If filing solely for portability, complete Part 6 correctly and consider whether you need to opt out by checking the appropriate box
  
  
• Inadequate documentation: Attach certified copies of wills, trust documents, and professional appraisals rather than informal valuations
  
  
• Signature omissions: Ensure the executor signs the return and that paid preparers include their signatures and identification numbers where required
  
  

What Happens After You File

The IRS typically processes Form 706 within 9 months, though complex returns may take longer, so don't request an estate tax closing letter until at least 9 months after filing (IRS Instructions for Form 706). You may receive notices requesting additional information, supporting documentation, or clarification on asset valuations. If you owe additional tax, you can request a payment plan using Form 9465 or explore installment options under Section 6166 for qualifying estates with closely held business interests. You have appeal rights if you disagree with any IRS determinations, including the right to request an appeals conference or petition the U.S. Tax Court. Interest and penalties will continue to accrue on unpaid balances, but reasonable cause may excuse certain penalties if you can demonstrate good faith efforts to comply.

FAQs

Can I still file Form 706 for 2018 even though it's years late?

Yes, you can file late, but you'll face penalties and interest. However, if you're filing solely for a portability election and meet certain criteria, you may qualify for relief under Revenue Procedure 2017-34.

What penalties will I face for late filing?

The late filing penalty is 5% of unpaid tax per month (up to 25%), plus a late payment penalty of 0.5% per month. Additional penalties may apply for substantial understatement of asset values (IRS Instructions for Form 706, 2018).

Do I need transcripts before filing an amended return?

While not required, obtaining estate tax account transcripts can help you understand what the IRS has on file and ensure your amended return addresses all issues. Request transcripts by calling the IRS or submitting Form 4506-T.

How long do I have to claim a refund if I overpaid?

Generally, you have three years from the original due date or two years from when you paid the tax, whichever is later, to file a claim for refund.

Should I also file an amended state estate tax return?

This depends on your state's requirements. Many states tie their estate tax calculations to the federal return, so federal changes may require state amendments. Consult your state's tax agency or a local tax professional.

Can I set up a payment plan for estate taxes?

Yes, you can request an installment agreement using Form 9465, or explore Section 6166 elections for estates with closely held business interests that meet specific requirements (IRS Instructions for Form 706).

What if I discover additional assets after filing?

File an amended Form 706 marked "Supplemental Information" at the top and attach copies of the key pages from your original return. Include documentation for the newly discovered assets and any additional tax due (IRS Instructions for Form 706, 2018).

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