What IRS Form 706 (2021) Is For

Form 706 is used by the executor of a decedent's estate to calculate the federal estate tax imposed by Chapter 11 of the Internal Revenue Code and the generation-skipping transfer (GST) tax on direct skips. Form 706 must be filed for estates of U.S. citizens or residents who died in 2021 if the gross estate plus adjusted taxable gifts and specific exemptions exceed $11,700,000, or when the executor elects to transfer the deceased spousal unused exclusion (DSUE) amount to the surviving spouse regardless of estate size (IRS Instructions for Form 706, Rev. September 2021).

When You'd Use Form 706 for 2021 (Late or Amended Filing)

You would file Form 706 for 2021 as a late or amended return in several scenarios: when you missed the original 9-month deadline after the decedent's death date, when you received IRS notices about unfiled returns or balance due, when you need to make or correct a portability election for DSUE transfer to a surviving spouse, or when you discover errors in a previously filed return requiring correction.

Late filers may still elect portability up to two years after death under Rev. Proc. 2017-34, though special relief under Regulations section 301.9100-3 may be needed thereafter. For amendments, you must file another complete Form 706 marked "Supplemental Information" with copies of the original return's first four pages attached (IRS Instructions for Form 706, Rev. September 2021).

Key Rules Specific to 2021

• Basic exclusion amount: $11,700,000
  
  
• Basic credit amount: $4,625,800
  
  
• Ceiling on special-use valuation: $1,190,000
  
  
• 2% installment payment threshold: $1,590,000
  
  
• Annual gift tax exclusion: $15,000 per donee
  
  

These amounts differ from current higher inflation-adjusted thresholds, making proper year identification crucial for accurate calculations (IRS Instructions for Form 706, Rev. September 2021).

Step-by-Step (High Level)

• Gather required documents: Death certificate, certified will copy, Forms 709 (gift tax returns), Form 712 (life insurance statements), and account transcripts if amending
  
  
• Complete Form 706: Use the correct 2021 revision, fill all required schedules (A through I as applicable), ensure every Recapitulation line has an entry (even zeros)
  
  
• Attach supporting schedules: Include Schedule F (required for all returns), relevant property schedules, and any DSUE/portability documentation
  
  
• Submit properly: Mail to IRS Kansas City, MO processing center (Florence, KY for amendments), or file electronically if available; keep complete copies of all submitted materials
  
  
• Pay any tax due: Use check payable to “United States Treasury” or electronic payment methods; consider installment options if qualifying (IRS Instructions for Form 706, Rev. September 2021)
  
  

Common Mistakes and How to Avoid Them

• Missing portability election deadlines: File within 9 months (or extension period) to preserve DSUE transfer rights; use Rev. Proc. 2017-34 relief procedures if late
  
  
• Incomplete required attachments: Always include death certificate, certified will, and Form 712 for life insurance; missing documents delay processing
  
  
• Valuation understatements: Avoid 20% penalties by properly valuing assets at fair market value; gross understatements (40% or less of true value) incur 40% penalties
  
  
• Blank Recapitulation lines: Enter zero on unused lines rather than leaving blank; include CUSIP numbers for securities and EINs for business entities
  
  
• Inadequate signatures: Executor must sign the return; paid preparers must sign too; all co-executors remain liable even if only one signs
  
  
• Amendment labeling errors: Mark amended returns “Supplemental Information” and attach original return pages 1–4 to avoid confusion (IRS Instructions for Form 706, Rev. September 2021)
  
  

What Happens After You File

The IRS typically takes 9–18 months to process estate tax returns, with examination selection occurring during initial review (IRS Policy Statement 4-52). You'll receive notices if additional information is needed or if the return is selected for audit.

Payment plans are available through Form 9465 if you cannot pay the full amount due, and Section 6166 installment elections allow qualifying estates to pay over 10 years.

Estate tax closing letters are issued only upon request and require waiting at least 9 months after filing. Account transcripts available through Form 4506-T or the Transcript Delivery System may serve as alternatives. If you disagree with IRS determinations, you have appeal rights and can request conferences with the Appeals Office (IRS Instructions for Form 706, Rev. September 2021).

FAQs

What penalties apply for late filing Form 706 for 2021?

Section 6651 imposes penalties for both late filing and late payment unless reasonable cause exists. Penalty explanations are only considered after you receive a notice, not when filed with the return.

Can I still make a portability election if I file Form 706 late?

Yes, but with limitations. Rev. Proc. 2017-34 allows portability elections up to two years after death. After that, you must seek relief under Regulations section 301.9100-3.

How do I get copies of prior tax returns needed for Form 706?

Request transcripts using Form 4506-T or access them online through the Transcript Delivery System. Wait at least 6 months after filing before requesting estate tax account transcripts.

Is there a statute of limitations for claiming refunds on amended Form 706?

Generally, you must file amended returns within 3 years of the original filing date or 2 years from when tax was paid, whichever is later, unless special circumstances apply.

Do I need to amend state estate tax returns if I amend federal Form 706?

Review your state’s requirements, as many states have conformity provisions that may require amended state returns when federal returns are changed. State rules vary significantly.

What's the difference between Form 4506-T transcripts and closing letters?

Account transcripts show transaction history and acceptance of returns but aren’t official closing letters. Closing letters provide formal IRS acceptance but are only issued upon specific request.

Can I set up payment plans for estate tax due on late-filed returns?

Yes, use Form 9465 for installment agreements or apply online at IRS.gov if you owe $50,000 or less. Section 6166 elections for qualifying estates must be made on timely filed returns, but other payment arrangements remain available.

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