An estate tax clearance letter is issued by the IRS after you file a federal estate tax return. This letter certifies that the IRS has accepted the estate tax return, and it is required before an estate can be closed. Many clients, especially those serving as executors of a loved-one’s estate, ask how long does it take for the IRS to issue an estate tax clearance letter.
Timeline for Obtaining an Estate Tax Closing Letter
IRS Form 706 is the federal estate tax return form required to be filed with the IRS. The deadline for filing is nine months after the decedent’s death. An automatic six-month extension of time to file the return can be requested; however, the request for an extension does not extend the time for paying any taxes that may be due. Any delay in filing Form 706 will obviously delay the time for the IRS to process and examine the return after it has been filed.
Once IRS Form 706 is filed, it normally takes 6 to 8 weeks from the date the IRS receives the form, for the return to be processed and entered into the IRS’s database. The IRS states on its website that it will take four to six months to receive a closing letter for returns that are accepted as filed, and that contain no errors or special circumstances. However, in most cases, it takes anywhere from six to nine months, from the time the return is filed, for the IRS to either issue an estate tax clearance letter.
It takes longer if the return is audited
Instead of receiving a tax clearance letter, you may receive notice that the tax return is being audited. In the unfortunate case that the estate tax return is audited, it may take another four to six months for the IRS to complete the audit and issue an estate tax clearance letter. In more complex cases, an audit could take an additional six months to several years for the audit to be completed. Patience is definitely required.
Why is an estate tax clearance letter necessary?
When someone dies, a tax lien is created as to the title to any real estate he or she owned. The tax lien attaches to the property automatically, with no recorded notice required. This cloud on the title prevents the executor from selling the property with a clear title until estate taxes, if any are owed, have been paid to the IRS. Liens are how the federal government makes sure that it receives the taxes that are due. The lien is only released when the taxes have been paid.
If you have questions regarding estate taxes, or any estate planning concerns in California, please contact the Schomer Law Group either online or by calling us at (310) 337-7696.