Paying the Estate Tax with Form 706Tax Professionals' Resource
September 24, 2012 — 1,331 views
Chapter 11 of the Internal Revenue Code imposes an estate tax on the inheritance conferred to survivors of a deceased person. In order to fulfill the tax obligations associated with inheritance, form 706 must be filled out and submitted. Here is what you need to know about form 706.
Who Needs to File?
Since 2011, every inheritance bequeathed to surviving family requires form 706 if it fulfills one of two requirements. First, if the estate of the deceased is valued at more than five million dollars, form 706 is required. The other condition is when the deceased has elected to allow the surviving spouse to use the untapped exclusion amount. This refers to sheltering of gifts from taxes levied by the federal government. In either case, form 706 is required. If you are not sure, you can follow a simple formula to determine requirement.
Add the taxable gifts made by the deceased since 1976, the total specific exemptions since 1976, and the gross estate value. If the sum is less than five million dollars, form 706 is not required.
When Does Form 706 Need to Be Filed?
Form 706 must be filed within nine months of death of the deceased. An extension can be gained in certain circumstances. It must be signed by the legal representative, the executor, of the estate. The form is then sent to the Department of Treasury.
What if I Need to Make Changes Once I Have Submitted?
In order to make an amendment to form 706, you will need to prepare a new form. You then must write on the top of the form the words "supplemental information." Fill in the amended information as needed. Attach a copy of the first three pages of the original form 706. Resend to the Department of Treasury.
If you fail to pay the estate tax in a timely manner, you will incur tax penalties. These penalties can be avoided if there are extenuating circumstances. Otherwise, you will incur the penalty of five percent for each month that the return is not filed. This can quickly add up, so it is important to file in a timely manner.
Contact a lawyer for help if you are confused about the necessity to file form 706 for estate tax. A legal representative can also help you correctly generate the form if you need to fill it out.