What Form 706 (2014) Is For
Form 706 is the federal estate tax return used to report the value of a decedent’s estate and calculate estate taxes owed to the United States Treasury. This filing form determines how much tax must be paid after a decedent’s death, based on the fair market value of all assets. Executors use it to account for the gross estate, adjusted taxable gifts, deductions, and any applicable credits under the Internal Revenue Code. It also applies to the generation-skipping transfer tax, ensuring all transfers to grandchildren or younger beneficiaries are properly reported.
When You’d Use Form 706 (2014)
Executors must file Form 706 (2014) when the total value of the decedent’s gross estate, plus adjusted taxable gifts and specific exemptions, exceeds the federal estate tax exemption of $5,340,000 for estates of decedents dying in 2014. The estate return must also be filed if the executor chooses to elect portability for a surviving spouse. Filing deadlines are strict: the estate tax return is due nine months after the decedent’s date of death, although an automatic six-month extension is available by filing Form 4768 before the due date. Late or amended estate tax returns must include explanations and complete asset valuations.
Key Rules and Details for 2014
- Basic Exclusion Amount: The federal estate tax exemption for 2014 was $5,340,000, meaning most estates under this total value were not required to pay estate taxes.
- Applicable Credit Amount: Estates could claim a $2,081,800 tax credit corresponding to the basic exclusion.
- Top Estate Tax Rate: The maximum estate tax rate was 40 percent on taxable estate amounts exceeding the exemption limit.
- Special-Use Valuation Ceiling: Family farms or small businesses may reduce asset valuations by up to $1,090,000 if they qualify under Section 2032A.
- Annual Gift Exclusion: Lifetime gifts up to $14,000 per recipient were excluded when calculating taxable gifts.
- Portability Election: Executors could elect portability to transfer any deceased spouse’s unused exclusion, or DSUE amount, to the surviving spouse by timely filing the form.
- Installment Payments: Estates meeting Section 6166 criteria could pay estate taxes in installments when closely held business assets represented at least 35 percent of the decedent’s gross estate.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-Step Filing Process (High Level)
Step 1: Gather Documentation
Collect all records related to the decedent’s assets, including the death certificate, will, appraisals establishing fair market value, prior gift tax returns, and any life insurance proceeds. Accurate documentation ensures timely filing and supports correct asset valuations for estate and gift taxes.
Step 2: Identify the Executor
Provide court-issued letters testamentary or similar proof showing who is responsible for filing. Executors must sign the estate tax return under penalty of perjury, verifying that all information reflects the decedent’s estate accurately.
Step 3: Determine Fair Market Value
List the fair market value of each asset on the date of the decedent’s death. Executors may use alternate valuation six months later if it lowers both the gross estate and the total tax owed. This valuation determines the calculation of estate taxes owed to the United States.
Step 4: Complete the Schedules
Each type of property belongs on its own schedule. Real estate, securities, cash, life insurance proceeds, jointly owned assets, and business interests all require detailed reporting. Properly completed schedules reduce the likelihood of follow-up questions and tax bills.
Step 5: Compute Deductions
Deduct funeral expenses, debts, charitable gifts, and estate administration costs. These deductions lower the taxable estate and help calculate estate taxes more accurately under federal guidelines.
Step 6: Calculate and Pay Estate Taxes
Use the tax tables in the instructions to compute the estate tax based on total assets and deductions. Pay estate taxes using a check payable to the United States Treasury or through electronic payment. Payment must accompany the timely filing of the return.
Step 7: File the Estate Return
Mail the estate tax return to the IRS Service Center in Cincinnati, Ohio, or use a private delivery service recognized by the IRS for timely filing. Keep copies of all estate tax returns, supporting documents, and receipts in case of an IRS inquiry or review.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Missing the Filing Deadline: File Form 4768 early to request an automatic six-month extension if additional time is needed to complete valuations or calculations.
- Incomplete or Missing Attachments: Include certified copies of the death certificate, will, and prior gift tax returns to meet the filing requirement and avoid processing delays.
- Failing to Elect Portability: Always elect portability on the estate tax return when a surviving spouse exists, preserving the deceased spouse's unused exclusion for future use.
- Incorrect Asset Valuations: Obtain professional appraisals to ensure all decedents’ assets are reported at fair market value and prevent underreporting penalties.
- Overlooking Lifetime Gifts: Include all taxable gifts reported on previous gift tax returns to ensure the total estate and gift taxes are properly calculated.
- Omitting Executor Documentation: Attach proof of executor appointment to verify authority for filing the form and signing on behalf of the estate.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
Once filed, the IRS reviews the estate tax return for completeness and accuracy. Most estates receive acknowledgment through a transcript instead of an estate tax closing letter. The IRS may contact the executor if asset valuations appear inconsistent or deductions seem excessive. Interest accrues on unpaid taxes until full payment is received. For examined estates, final transcripts serve as confirmation that the tax return has been accepted, replacing the formal closing letter in most cases.
FAQs
Who must file Form 706 estate tax return?
An executor must file Form 706 when the decedent’s gross estate plus adjusted taxable gifts exceeds the federal estate tax exemption of $5,340,000, or to elect portability for a surviving spouse.
What is the due date for Form 706 estate tax returns?
The filing deadline is nine months after the decedent’s death. Executors may request a six-month extension by filing Form 4768 before the due date to maintain a timely filing status.
How is fair market value determined for Form 706 (2014) estate and generation-skipping transfers?
Fair market value reflects the price at which an asset would sell between a willing buyer and a willing seller. Executors may use alternate valuation six months after death if it results in a reduced estate tax.
How does the deceased spousal unused exclusion (DSUE amount) affect married decedents?
The DSUE amount allows a surviving spouse to use any remaining estate tax exemption from their deceased spouse by electing portability on a timely filed estate tax return.
How can I elect portability on Form 706 (2014) for my estate?
Executors elect portability by filing a complete Form 706 as soon as possible. This election transfers the deceased spouse’s unused exclusion to the surviving spouse for future estate or gift tax benefits.
How can I request a closing letter for my estate tax return?
Most estates no longer receive a paper closing letter. Executors can seek a transcript to verify the IRS's processing and acceptance of the estate return.
For more resources on filing or understanding prior-year IRS forms, visit our guide on Business Income Tax Forms.
