What the Form Is For

Form 706-GS(D) is the tax return used to calculate and pay Generation-Skipping Transfer (GST) tax on distributions you receive from a trust. Think of it as a way the IRS taxes wealth transfers that "skip" a generation—for example, when a grandparent's trust distributes money directly to a grandchild instead of first going to the parent.

You're considered a "skip person" if you're two or more generations younger than the person who created the trust (the transferor). This typically means grandchildren, great-grandchildren, or unrelated individuals who are more than 37½ years younger than the transferor. When you receive taxable distributions from such a trust, you're responsible for reporting them and paying any GST tax owed.

The form works hand-in-hand with Form 706-GS(D-1), which the trustee is required to send you. That form provides the essential information you need—including the distribution amount, date, and something called the "inclusion ratio"—to complete your own return.

When You’d Use (Late/Amended Filing)

Regular Filing

You must file Form 706-GS(D) for distributions received during a calendar year, regardless of your personal income tax year. The deadline is April 15th of the year following the calendar year when you received the distributions. For example, if you received distributions in 2024, you must file by April 15, 2025.

Important Exception

If the Form 706-GS(D-1) you received shows that all your distributions have an inclusion ratio of zero, you don't need to file Form 706-GS(D) at all. An inclusion ratio of zero means no GST tax is due on those distributions.

Extensions

If you can't meet the April 15th deadline, you can get an automatic six-month extension (until October 15th) by filing Form 7004 by the original due date. The extension is truly automatic—you don't need to provide a reason or wait for approval. However, remember that an extension to file is not an extension to pay. You'll still owe interest on any tax not paid by the original deadline.

Late Filing

Filing late without an extension triggers penalties under IRS Section 6651 for both late filing and late payment. The IRS will assess interest on unpaid taxes from the original due date until the balance is paid, even if you had an extension to file. The only way to avoid late filing penalties is to demonstrate "reasonable cause" for your delay.

Amended Returns

If you discover errors after filing or incur additional deductible expenses (like legal fees related to the GST tax), you can file Form 843 (Claim for Refund and Request for Abatement) to correct your return and claim a refund.

Key Rules for 2024

Tax Rate

The GST tax rate is 40% for all distributions after December 31, 2012, and this remains in effect for 2024. This rate is applied to your "taxable distribution" after deductions.

Inclusion Ratio

This critical number (provided by the trustee on Form 706-GS(D-1)) determines what portion of each distribution is subject to GST tax. It ranges from 0 to 1. An inclusion ratio of 0 means the distribution is fully exempt from GST tax; an inclusion ratio of 1 means it's fully taxable. The ratio is multiplied by the distribution value to calculate your "tentative transfer."

Valuation

Distributions must be valued at their fair market value (FMV) on the distribution date. Fair market value is what a willing buyer would pay a willing seller when neither is forced to transact and both have reasonable knowledge of relevant facts. If you received property (rather than cash), you may need professional appraisals, especially for real estate, closely-held business interests, or collectibles.

Required Attachments

You must attach copies of all Forms 706-GS(D-1) received during the year to your Form 706-GS(D). Keep extra copies for your records—you may need them if the IRS has questions.

Where to File

Mail your completed form to: Department of the Treasury, Internal Revenue Service Center, Kansas City, MO 64999. If using a private delivery service (like FedEx or UPS), use: Internal Revenue Submission Processing Center, 333 W. Pershing, Kansas City, MO 64108.

Deductible Expenses

You can deduct "adjusted allowable expenses" related to preparing Form 706-GS(D) and determining, collecting, or refunding the GST tax. These expenses must be prorated by the inclusion ratio if you have distributions with different ratios.

Step-by-Step (High Level)

Here's how to complete Form 706-GS(D):

Step 1: Gather Your Documents

Collect all Forms 706-GS(D-1) you received from trustees during the year. Each form contains crucial information: distribution dates, amounts, inclusion ratios, and trust identification details.

Step 2: Complete Part I (General Information)

Enter your identifying information. If you're an individual, use your name and Social Security number. If you're a trust receiving distributions, use the trust's name and Employer Identification Number. Also include the address where you want IRS correspondence sent.

Step 3: Complete Part II (Schedule of Taxable Distributions)

List each taxable distribution with an inclusion ratio greater than zero. For each entry, report the item number (matching Form 706-GS(D-1)), distribution date, trust name and EIN, inclusion ratio, distribution value, and "tentative transfer" (value multiplied by inclusion ratio). If the trustee left values blank or you disagree with them, attach a statement showing your calculations.

Step 4: Complete Part III (Tax Computation)

Calculate your total tentative transfers (sum from Part II). Subtract any adjusted allowable expenses (like tax preparation fees, properly prorated). Multiply the result by the 40% maximum tax rate to get your GST tax owed. Subtract any payments already made or credits, then enter the balance due.

Step 5: Sign, Date, and Mail

Either you or your authorized representative must sign the form. Paid preparers must also sign in the designated area. Mail the form with all attached 706-GS(D-1) forms to the Kansas City address. If you owe tax, include your payment (check payable to "United States Treasury") with your name, SSN/EIN, tax year, and "Form 706-GS(D)" written on it.

Common Mistakes and How to Avoid Them

Mistake #1: Filing When Not Required

Many people file Form 706-GS(D) even when all their distributions have inclusion ratios of zero. Review your Forms 706-GS(D-1) carefully—if all inclusion ratios are zero, you don't need to file.

Mistake #2: Missing or Incomplete Attachments

Failing to attach all Forms 706-GS(D-1) is a frequent error that delays processing. Make copies before mailing and attach every single 706-GS(D-1) you received, even for non-taxable distributions you're reporting.

Mistake #3: Incorrectly Calculating Deductible Expenses

When you have distributions with different inclusion ratios, you must prorate preparation expenses among them based on the relative value of each distribution. Simply deducting the full fee is incorrect. Follow the detailed proration formula in the instructions.

Mistake #4: Using the Wrong Valuation Date or Method

Distributions must be valued as of the distribution date shown on Form 706-GS(D-1), not when the trust originally acquired the property or when you later sell it. For non-cash property, obtain professional appraisals and attach them to support your values.

Mistake #5: Missing the Deadline Without Filing for Extension

April 15th comes quickly. If you won't make the deadline, file Form 7004 beforehand to get an automatic extension. Filing late without an extension guarantees penalties and interest.

Mistake #6: Disagreeing with Trustee Values Without Documentation

If you believe the trustee's reported values are wrong, you can report different amounts, but you must attach a detailed statement explaining your calculations and reasoning. Simply changing numbers without explanation invites IRS questions.

Mistake #7: Attaching Explanations for Reasonable Cause

Don't attach explanations for late filing to your return. The IRS specifically states these won't be considered. Instead, wait for a penalty notice, then respond with your explanation.

What Happens After You File

Initial Processing

The IRS processes your Form 706-GS(D) at their Kansas City center. Processing typically takes several weeks to months. If you're due a refund, expect it within 8-12 weeks under normal circumstances.

Payment of Tax

If you owe GST tax, pay by the April 15th deadline to minimize interest charges. Interest accrues daily on unpaid balances from the original due date, even if you received a filing extension.

IRS Notices

You may receive notices for various reasons—requesting additional information, proposing adjustments to values you reported, assessing penalties for late filing, or simply acknowledging receipt. Respond promptly to all notices; the IRS typically gives you 30-60 days to reply.

Penalties and Interest Assessment

If you filed or paid late without reasonable cause, expect a notice showing penalty calculations. Section 6651 penalties can be substantial—5% of unpaid tax per month for late filing (up to 25%) and 0.5% per month for late payment (up to 25%). You can request penalty abatement by demonstrating reasonable cause, but you must make this request after receiving the penalty notice, not when filing.

Audits and Examinations

While GST tax returns have lower audit rates than regular income tax returns, the IRS may examine your return, especially if:

• You reported significantly different values than the trustee
• You claimed large deductions
• The distributions involved hard-to-value assets
• You reported unusually high or low inclusion ratios

Record Retention

Keep copies of your filed Form 706-GS(D), all Forms 706-GS(D-1), receipts for expenses you deducted, appraisals, and any correspondence with the IRS. The IRS recommends retaining tax records for at least three years from the filing date, but longer retention (six years) is wise for estate and GST tax matters.

FAQs

Q1: I received Form 706-GS(D-1) from a trust, but I don't understand what it means. Do I automatically owe tax?

Not necessarily. Check Part II, line 3, column d on each Form 706-GS(D-1) you received—that's the inclusion ratio. If all your Forms 706-GS(D-1) show inclusion ratios of zero, you don't owe GST tax and don't need to file Form 706-GS(D) at all. If any inclusion ratio is greater than zero, you need to file and report those distributions.

Q2: What's the difference between Form 706-GS(D) and Form 706-GS(D-1)?

Form 706-GS(D-1) is what the trustee files to notify you (the beneficiary) about distributions subject to GST tax. Think of it as an information return, like a W-2 or 1099. Form 706-GS(D) is your tax return—you use the information from 706-GS(D-1) to calculate and pay the GST tax you owe.

Q3: Can I file Form 706-GS(D) electronically?

Currently, Form 706-GS(D) cannot be filed electronically. You must file a paper return by mail to the Kansas City IRS center. Make sure to keep copies of everything you send.

Q4: I received distributions from multiple trusts. Do I file one Form 706-GS(D) or multiple forms?

File one Form 706-GS(D) that reports all taxable distributions from all trusts you received during the calendar year. List each distribution separately in Part II, attach all Forms 706-GS(D-1), and calculate one total GST tax owed.

Q5: The trustee didn't send me Form 706-GS(D-1). What should I do?

Contact the trustee immediately and request the form. Trustees are legally required to file Form 706-GS(D-1) with the IRS and send you a copy by April 15th following the year of distribution. If the trustee refuses or fails to provide it, you should still file Form 706-GS(D) using the best information available and attach a statement explaining that you didn't receive 706-GS(D-1) from the trustee.

Q6: I made estimated payments during the year. How do I claim credit for them on Form 706-GS(D)?

Unlike income tax returns, there's no formal estimated payment system for GST tax on distributions. However, if you made payments during the year that you want credited to your Form 706-GS(D), contact the IRS directly or include a statement with your return explaining the payments and when they were made. Enclose documentation showing the payments were designated for GST tax.

Q7: What if I disagree with the value the trustee reported on Form 706-GS(D-1)?

You can report a different value on your Form 706-GS(D), but you must attach a detailed statement explaining why you believe the trustee's value is incorrect and how you determined the correct value. Include supporting documentation like independent appraisals. Be prepared for IRS scrutiny—if your value differs significantly from the trustee's, the IRS may examine both returns.

For More Information

Visit the official IRS Form 706-GS(D) page at IRS.gov/Form706GSD for the latest forms, instructions, and updates. You can also call the IRS Estate and Gift Tax line at 866-699-4083 for technical assistance.

Sources

• IRS Form 706-GS(D) About Page
• Instructions for Form 706-GS(D)
• IRS Form 706-GS(D) Instructions PDF
• IRS Instructions for Form 709 (2024)