IRS Form 706 (2016) Estate Tax Return Filing Guide

Form 706 (2016) is the federal estate and generation-skipping transfer tax return filed by executors of decedents who passed away in 2016. It reports asset values, calculates federal tax owed, and records elections protecting surviving spouses and beneficiaries.

Late Filers 

Executors who missed the nine-month deadline should file Form 706 promptly, since penalties and interest accrue until the IRS receives a complete return and payment.

Multiple Income Sources 

Estates holding real property, business interests, life insurance, retirement accounts, and other assets must report every source at fair market value using the correct schedules.

Itemizing Deductions 

Executors may deduct administration expenses, attorney fees, debts, and state death taxes actually paid, reducing the taxable estate and federal estate tax owed.

Claiming 2016 Credits 

The 2016 applicable credit of $2,125,800 offsets estate tax on amounts up to the $5,450,000 exclusion, as both represent the same shelter.

IRS Compliance 

Proper filing satisfies federal obligations, closes the estate’s tax liability, and creates an official record if the Internal Revenue Service requests documentation or review. 

Citizens Abroad / Military 

Estates of U.S. citizens or resident decedents who lived or held property abroad must file Form 706 and report worldwide assets at fair value.

Follow the steps below to prepare an accurate estate tax return for a 2016 decedent. Note that some thresholds and elections referenced below are specific to this tax year.

1. Gather Your Documents Before Starting 

Collect the decedent's death certificate, certified executor authority, all prior gift tax returns, financial account statements, property deeds, and professional appraisals for every estate asset before completing any of the sections.

2. Confirm Executor Authority and Filing Obligation 

Under IRC §2203, the term “executor” includes any appointed executor, administrator, or any person in possession of the decedent’s property if none is formally appointed. Confirm who holds legal responsibility before signing. A filing is required if the gross estate and adjusted taxable gifts exceed $5,450,000 or when electing portability for a surviving spouse. 

3. Complete All Pages and Report Every Asset 

Use only the November 2016 revision of Form 706. Report assets by schedule: real property on Schedule A, securities on Schedule B, debts owed on Schedule C, insurance on Schedule D, jointly owned property on Schedule E, business assets on Schedule F, annuities on Schedule I, and liabilities on Schedule K. 

4. Prepare Schedules and Calculate the Taxable Estate 

Total all assets across Schedule A through I to determine the gross estate, then subtract deductions on Schedules J through O to calculate the taxable estate. Report expenses on J, debts on K, losses on L, marital transfers on M, and charitable transfers on O.

5. Apply the Exclusion and Calculate Tax Owed 

The $5,450,000 basic exclusion for 2016 is offset by the $2,125,800 unified credit, which equals the tax on that exclusion amount and is not separate. The marital deduction applies to qualifying transfers. Under §2032A, special-use valuation was capped at $1,110,000, and §6166 allows deferred tax payments with reduced interest rates on qualifying amounts.

6. Complete Portability and GSTT Elections 

To transfer the deceased spousal unused exclusion, complete Part 6 fully. Attach Schedule R and R-1 to report GSTT events and allocate exemption to reduce or eliminate generation-skipping transfer tax on qualifying transfers.

Missing Tax Records for 2016?

Executors filing late or amending a 2016 estate tax return may no longer have access to all original documents, appraisals, or prior gift tax filings needed. IRS records and third-party sources can help accurately reconstruct the estate's complete financial picture.

IRS Wage & Income Transcript 

This transcript reflects income and financial data reported to the IRS under the decedent's Social Security number, helping executors identify reportable items and verify figures for the estate tax return.

IRS Account Transcript 

The account transcript shows previously filed returns, tax assessments, payments received, and any IRS adjustments, confirming the estate's current compliance status with the Internal Revenue Service.

Social Security Administration 

SSA earnings records provide an official earnings history that helps verify reported income and corroborate figures used to reconstruct the decedent's financial profile when original records are missing.

Contact Prior Employers 

Employers are legally required to retain payroll records for a minimum period, making them a useful supplemental source for verifying compensation history when other estate financial documentation is unavailable.

Do not estimate asset or income figures; use IRS transcripts and official records to match reported amounts and reduce follow-up notices on the estate.

These are the most common errors that cause IRS delays, rejected returns, or missed elections on 2016 Form 706 filings.

• Using the wrong form revision —Filing any version other than the November 2016 Form 706 may cause rejection and require complete resubmission with supporting documentation.
• Missing Schedule R or R-1 — Failing to include required GSTT schedules for direct skips or distributions results in an incomplete return and potential IRS rejection.
• Wrong executor classification — Misidentifying the executor under IRC §2203 can trigger IRS correspondence, delay processing, and affect the estate’s official closing timeline significantly overall.
• Misapplying the marital deduction — Incorrectly limiting the marital deduction for qualifying transfers or trusts can increase estate tax liability and reduce allowable tax relief.
• Failing to allocate the GSTT exemption — Not allocating the GSTT exemption on Schedule R may result in unnecessary tax on transfers to skip persons that could qualify for exemption.
• Assuming a refund is still available — The refund claim period typically expires after three years, so executors should verify eligibility carefully before submitting any claim for an overpayment.
• Reporting retirement accounts incorrectly — IRAs and annuities must be reported on Schedule I; misreporting them can delay IRS processing and require corrected amended filings.
• Unsigned return — An unsigned Form 706 is invalid and will not be processed until properly signed and dated by the executor and any paid preparer.
• Missing attachments — Omitting required forms, appraisals, or supporting documents results in an incomplete return and delays IRS acceptance, processing, and overall review timelines.

What is IRS Form 706 (2016) used for?

Form 706 (2016) is the federal estate and generation-skipping transfer tax return filed by an executor for a decedent who died in 2016. It reports total estate value, calculates the estate tax owed, and records elections, such as portability and special-use valuation, that affect surviving spouses and beneficiaries.

Can I still file a 2016 estate tax return if the deadline has passed?

Yes, executors should file as soon as possible, even after the deadline. Filing stops additional failure-to-file penalties from accruing. Penalties and interest already assessed still apply, but the balance stops increasing once the IRS receives a complete return and full payment.

What was the estate tax filing threshold for 2016?

The 2016 filing threshold was $5,450,000, combining the gross estate with adjusted taxable gifts. The $2,125,800 credit offsets tax on that amount. Estates below the threshold generally did not need to file unless they elected portability or reported generation-skipping transfers.

How does the generation-skipping transfer tax work on Form 706?

The generation-skipping transfer tax applies to transfers made to skip persons, including grandchildren and certain trusts. Executors must report direct skips, taxable distributions, and taxable terminations on Schedule R or R-1. Properly allocating the GST exemption may reduce or eliminate additional federal transfer tax liability on qualifying estate transfers.

How do I elect portability for a surviving spouse on a 2016 return?

To elect portability, complete Part 6 of Form 706 fully. This transfers the deceased spouse’s unused exclusion to the surviving spouse. Late elections may be allowed under Rev. Proc. 2022-32 within five years, with additional relief possible through a private ruling.

Can I amend a 2016 estate tax return I already filed?

Yes, use the November 2016 Form 706 and mark it as a supplemental return. Attach all original pages and explain each change clearly. Amendments correct asset values, add omitted items, adjust deductions, or fix reporting errors made in the original filing.

What happens after I file Form 706 with the IRS?

The IRS usually takes several months to review a paper return. Closing letters are not automatic and must be requested with a fee. The estate may still face adjustments if errors are found, and unpaid balances continue to accrue interest until resolved.