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And it should come as no surprise to learn that the IRS is not exactly efficient in processing federal estate tax returns.
The purpose of this article is to explain what happens after a federal estate tax return is filed with the IRS and how long it will take to receive the coveted estate tax closing letter .
Timeline for Processing IRS Form 706
IRS Form 706 must be filed with the IRS within nine months of the decedent's date of death. An automatic six-month extension of time to file the return can be requested using IRS Form 4768, Application for Extension of Time to File Estate Tax Return. but this will not delay the time for paying any taxes due.
Thus, estimated taxes should be paid when IRS Form 4768 is filed, otherwise interest and penalties will accrue. Of course, any delay in time in filing Form 706 will delay the time for the IRS to process and examine the return once it is filed.
Once IRS Form 706 is filed with the IRS, below is the timeline for the IRS to initially process the return, examine the return, and then finally issue the estate tax closing letter:
- It will take 6 to 8 weeks
from the date the IRS receives Form 706 before it is even processed and entered into the IRS's database. So, in other words, do not call if you have any questions about a Form 706 until at least 6 weeks have passed since you filed the return.
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- It will take six to nine months from the time the return is filed for the IRS to either issue an estate tax closing letter or inform the executor that the estate tax return is being audited. This is contrary to the information listed on the IRS's website. which states that it will take four to six months to receive a closing letter for returns that are accepted as filed and contain no other errors or special circumstances. From personal experience, it is much closer to nine months than six months to receive the closing letter for returns that are accepted as filed.
- If the estate tax return is audited, it will take another four to six months before the audit is completed and an estate tax closing letter is issued. In some extreme cases, the audit can take an additional six months to several years before the audit is completed and an estate tax closing letter is issued.