When a person who is neither a U.S. citizen nor a U.S. resident passes away owning U.S.-based property, their estate may need to file Form 706-NA (United States Estate and Generation-Skipping Transfer Tax Return). This specialized tax form calculates federal estate taxes owed on U.S. assets, a process that can seem daunting for foreign executors and families. Here's what you need to know about Form 706-NA in plain English.

What Form 706-NA Is For

Form 706-NA is the IRS form used to report and calculate estate taxes for deceased individuals who were nonresident aliens (neither U.S. citizens nor residents at the time of death) but who owned property located in the United States. The estate tax is imposed on the transfer of the deceased person's U.S.-situated property rather than on anyone receiving that property.

The form serves several critical functions:

• Reports all U.S.-based assets owned by the deceased person at the date of death
• Calculates the federal estate tax owed on those assets
• Determines Generation-Skipping Transfer (GST) tax if property passes to grandchildren or later generations
• Documents allowable deductions to reduce the taxable estate
• Claims tax treaty benefits if the deceased's country has an estate tax treaty with the U.S.

Unlike Form 706 (used for U.S. citizens and residents, who receive a generous exemption of over $12 million in 2023), nonresident aliens filing Form 706-NA face a much smaller exemption of just $60,000.

When You’d Use Form 706-NA

When You Must File

You must file Form 706-NA if the total value of the deceased person's U.S.-situated assets, plus certain lifetime gifts and exemptions, exceeds $60,000 at the date of death. The executor (personal representative) named in the will or appointed by law is responsible for filing.

Filing Deadline

Form 706-NA must be filed within 9 months after the date of death.
Example: If someone died on March 15, 2023, the return is due by December 15, 2023.

Extensions

File Form 4768 (Application for Extension of Time to File) before the 9-month deadline for an automatic 6-month extension.

Note: Extension to file ≠ extension to pay.

Late or Amended Returns

Late Filing

If you miss the deadline without an approved extension, file as soon as possible. The IRS imposes late filing penalties (5% of unpaid tax per month, up to 25%) unless you show reasonable cause.

Amended Returns

You can file an amended Form 706-NA for errors such as:

• Incorrect property valuations
• Missing assets
• Deduction mistakes

Check the “Amended Return” box on page 1, attach an explanation, and include documentation.

Key Rules for 2023

The $60,000 Threshold

Includes:

• Value of all U.S.-situated property
• Adjusted taxable gifts
• Gift tax specific exemption

What Property Is Included

Included (taxable):

• Real estate located in the U.S.
• Tangible personal property (cars, jewelry, art) in the U.S.
• Stock in U.S. corporations
• Debt obligations of U.S. persons or entities
• U.S. business interests

Excluded:

• Bank deposits in U.S. banks
• Portfolio interest on certain debt
• Property located abroad
• Life insurance proceeds (usually)

Tax Rates

Estate tax rates range from 18% to 40% on amounts above the $60,000 exemption.

Generation-Skipping Transfer (GST) Tax

If property passes to grandchildren or later generations, a 40% GST tax may apply.

Tax Treaty Benefits

Fifteen countries have estate tax treaties with the U.S.:
Australia, Austria, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Netherlands, South Africa, Switzerland, and the United Kingdom.

Treaties can:

• Increase the exemption amount
• Reduce or eliminate certain taxes
• Provide credits for foreign taxes paid

Attach a statement specifying applicable treaty provisions and supporting calculations.

Step-by-Step Filing Process (High Level)

Step 1: Determine If Filing Is Required

Check if U.S. assets + adjusted gifts > $60,000.

Step 2: Gather Documentation

Collect:

• Death certificate
• Certified will
• Asset records (deeds, bank statements, valuations)
• Proof of debts, expenses, and treaty documents

All foreign documents must include certified English translations.

Step 3: Obtain Employer Identification Number (EIN)

Apply online or via Form SS-4.

Step 4: Value All U.S. Assets

Use fair market value at date of death or elect an alternate valuation date (6 months later).

Step 5: Complete the Form

Key parts:

• Part I–VI: General info, tax computation, elections, recapitulation
• Schedules: Asset listings and deductions

List only U.S.-situated property but report worldwide assets for computation.

Step 6: Calculate Deductions

Allowable deductions include:

• Funeral and administration expenses
• Debts and mortgages (limited to U.S.-secured debt)
• Charitable gifts to U.S. charities
• Marital deduction (only if U.S. citizen spouse or QDOT trust)

Step 7: File and Pay

Mail to:
Internal Revenue Service
Kansas City, MO 64999

Payment options: check, money order, EFT.

Step 8: Wait for Processing

IRS typically takes months to review.
When accepted, Transaction Code 421 (TC 421) posts to the estate’s account transcript.

Common Mistakes and How to Avoid Them

1. Missing or Incomplete Documentation

Attach all required items—death certificate, will, translations, treaty statements.

2. Incorrect Property Classification

Understand what qualifies as U.S.-situated. Stocks of U.S. corporations always count; bank deposits often do not.

3. Undervaluing Assets

Use fair market value, not cost basis. Get professional appraisals.

4. Failing to Claim Treaty Benefits

Attach a treaty statement and calculations.

5. Missing the Filing Deadline

File within 9 months (or 15 with extension).

6. Incomplete Signature Section

All executors should sign.

7. Ignoring Generation-Skipping Transfer Tax

File Schedule R and R-1 for “skip person” beneficiaries.

What Happens After You File

Initial Processing

Form 706-NA is processed at the IRS Kansas City Campus.

Possible Outcomes

• Accepted as Filed: TC 421 posted.
• Selected for Examination: IRS may request more info.
• Math Error or Incomplete Return: You’ll receive a correction notice.

Estate Tax Closing Letter (ETCL)

Formal confirmation that the return is accepted.

How to Request

• Wait at least 9 months after filing.
• Submit via Pay.gov with $56 user fee.
• Check transcript first for TC 421.

Alternative

Many institutions accept the IRS account transcript instead of a closing letter.

Transfer Certificates

Needed to transfer U.S. property or stock without personal liability (IRC §2204). Request from the IRS Estate & Gift Tax unit.

Statute of Limitations

IRS has 3 years to assess additional tax. Keep records for 4 years after filing.

FAQs

Q1: Can I file Form 706-NA electronically?

No. It must be filed by mail (Kansas City, MO 64999).

Q2: What if the deceased owned U.S. real estate jointly with a spouse?

Only the deceased’s share (usually 50%) is included in the estate.

Q3: Do I need to file if the estate is below $60,000?

No, unless valuations are uncertain or close to the limit.

Q4: Can I pay the estate tax in installments?

Yes, under IRC §6166, for closely-held business interests.

Q5: What if I disagree with an IRS determination?

You can:

• Submit more info
• Request an IRS conference
• File an appeal
• Petition U.S. Tax Court

Q6: Who can help me file Form 706-NA?

Hire professionals experienced in nonresident alien estate taxation:

• Estate tax attorneys
• CPAs or Enrolled Agents
• International tax advisors

Q7: What if the deceased lived in a country with an estate tax treaty?

Attach a statement identifying treaty provisions, calculations, and proof of residence.

Conclusion

Form 706-NA represents a critical tax obligation for estates of nonresident aliens with U.S. assets. While the $60,000 threshold is low, compliance is achievable with careful preparation.

Key takeaways:

• File on time (within 9 months or with extension)
• Use fair market value
• Claim deductions and treaty benefits
• Attach complete documentation
• Seek expert help if needed

For More Information

• IRS Form 706-NA Page
• Instructions for Form 706-NA
• Estate Tax for Nonresidents Not Citizens
• FAQs on Estate Taxes

This guide is for informational purposes only and does not constitute legal or tax advice. Consult a qualified tax professional for personalized guidance.