Instructions for Form 706 (2020) Checklist
Form 706 is the United States Estate (and Generation-Skipping Transfer) Tax Return used to report a decedent’s gross estate and compute federal estate tax and any applicable generation-skipping transfer tax. It also supports elections that apply even when no tax due exists, including portability under the federal tax framework.
This checklist applies to decedents who died in 2020 and follows the Instructions for Form 706 in effect for that year. It emphasizes threshold analysis, proper use of the schedule, valuation discipline, and coordination with related IRS forms and estate administration records.
What Form 706 (2020) Does and Does Not Do
Form 706 reports the gross estate, deductions, and elections used to determine estate tax liability under federal law. It also computes the generation-skipping transfer tax when trust terminations or direct skips are subject to the statutory rules.
Form 706 is not an income tax return and does not reconcile capital gains taxes, individual credits, or employment tax matters. Items such as direct deposit elections, bank withholding, or income tax refunds belong on other IRS forms.
Filing Threshold and Estate Classification
Form 706 filing is required when the federal gross estate, combined with federal adjusted taxable gifts, exceeds the estate tax exemption for 2020. Filing may also be necessary to preserve elections, even when the exclusion amount exceeds the estate value.
Only estates of United States citizens or residents use Form 706. Estates of nonresident non-citizen decedents generally fall under Form 706-NA and follow different estate tax exclusion and situs rules.
Ten-Step Checklist
Step 1: Verify decedent identity and personal representative authority
Confirm the decedent’s legal name, Social Security number, date of death, and residency to establish whether Form 706 applies. Personal representative authority should be documented using court appointments or comparable estate administration records.
Determine whether the filing threshold is met by reviewing gross estate values and federal adjusted taxable gifts. This step also confirms whether the filing occurs solely to elect portability under the American Taxpayer Relief Act of 2012.
Step 2: Determine which return applies
Classify the decedent as a United States citizen or resident versus a nonresident non-citizen to confirm the correct tax return. Using the wrong estate tax form often causes delays in IRS processing and correspondence.
When Form 706-NA applies, reporting focuses on U.S.-situated property rather than worldwide assets. Correct classification prevents improper reporting of real estate, intangible personal property, and bank accounts.
Step 3: Confirm exclusion amount and portability intent
Apply the 2020 estate tax exclusion amount when determining whether estate tax is due.
Confirm whether the estate will elect portability to transfer the unused exclusion to a surviving spouse.
Portability requires timely filing even when no estate tax is owed. Values reported must still be supportable, as portability filings remain subject to review by the Internal Revenue Service.
Step 4: Gather valuation-ready documentation
Collect documentation supporting estate valuation, including deeds for real estate, brokerage statements, insurance policy records, and trust instruments. Digital assets and intangible personal property should also be identified and documented.
Estate valuation must reflect fair market value as of the date of death unless an alternate valuation election is made. Consistent documentation supports accuracy across IRS Form 706 schedules.
Step 5: Complete core identification sections
Enter decedent and personal representative information accurately in the opening sections of the return. Confirm addresses, identification numbers, and contact details to prevent delays in
IRS correspondence.
If third-party representation is authorized, coordinate Form 2848 or Form 8821 separately.
Authorization forms support representation but do not relieve the personal representative of their signature obligation.
Step 6: Prepare asset schedules for the gross estate
Complete the appropriate schedules for real and tangible personal property, intangible personal property, insurance policy interests, joint property, and digital assets. Each asset should appear once under the correct column heading.
Schedules such as Schedule D, Schedule E, and related asset schedules require defensible estate valuation. Supporting appraisals and statements should align with the amounts reported in the submitted PDF file.
Step 7: Deduct administration expenses on Schedule J
Use Schedule J only for funeral expenses and estate administration costs tied to property subject to claims. Invoices and estate accounting records must support expenses.
Do not report debts or mortgages on Schedule J. Proper placement reduces disputes during
IRS review and simplifies estate tax closing letter requests.
Step 8: Deduct debts and liens on Schedule K
Schedule K is reserved for the decedent's debts, mortgages, or liens on estate property.
Documentation should establish enforceability and balances as of the date of death.
Avoid duplicating deductions across schedules or between estate and income tax filings. Proper separation supports compliance with Internal Revenue Code requirements.
Step 9: Report losses and extraordinary expenses on Schedule L
Schedule L applies only to net losses during administration and costs tied to property not subject to claims. These deductions require careful coordination with fiduciary income tax filings.
Improper use of Schedule L is a common audit trigger. Each item should clearly fit within the schedule’s limited scope, as outlined in the Instructions for Form 706.
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Step 10: Finalize, sign, and file correctly
Review the return for consistency across schedules, attachments, and elections. Confirm signatures, dates, and completeness before submission.
File by the filing deadline, generally nine months after death, unless extended using Form 4768.
Verify the correct mailing address using current IRS guidance before sending.
Common Form 706 Limitations and Clarifications
Form 706 does not apply to nonresident aliens, who generally use Form 706-NA instead.
Estates using the wrong return often face delayed processing and additional IRS requests.
IRS forms, including Form 4506-T and account transcript requests, may be used after filing to confirm processing status. Proper preparation reduces the time the service spends resolving errors.
Practical Accuracy Reminders
Estate tax returns should align with the federal tax framework in effect for 2020, including changes under the Tax Cuts and Jobs Act. Reliance on outdated rules may lead to incorrect exclusion or filing threshold analysis.
Using IRS forms in PDF format through Adobe Acrobat Reader supports accurate completion and review. Careful preparation helps ensure timely filing and reduces follow-up related to tax due or estate tax exclusion questions.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
