March 2, 2017
Authored by: Kathy Sherby and Charles Lin
IRS Notice 2017-12
The Service issued FAQs in June of 2015 to let practitioners know that they were no longer routinely issuing closing letters. The Service instructed practitioners that they would now have to request such a closing letter, but could not do so until 4 months after filing the estate tax return. Their goal was to reduce the amount of work the Service needed to complete as a cost cutting measure. However, taxpayers need closure and the requests for closing letters almost became routine. Because so many practitioners were routinely requesting closing letters, the Service let it be known informally, with a posting on its website, that a transcript could be requested, and would be an acceptable substitute for an estate tax closing letter. But requesting such a transcript has not been a simple matter, with many groans of frustration along the way. The Service has now provided guidance in this Notice 2017-12 on this alternative method of confirming that an estate tax return examination is closed.
Although practitioners may prefer to obtain a closing letter, the Service points out in this Notice that an estate tax closing letter does not foreclose the Service from reexamining an estate tax return at a later date. Instead, a closing letter simply indicates that the estate tax return has been accepted, either as filed or after an adjustment to which the estate has agreed. After an estate tax closing letter has been sent to the taxpayer, for example, the Service may still audit the estate tax return that makes a portability election up until the statute of limitation has run on the estate tax return of the surviving spouse to determine the surviving spouse’s applicable exclusion amount.
After receiving so many requests for a closing letter, the Service began to realize that executors, state taxing authorities and probate courts want to know that an estate tax return has been accepted by the Service. Therefore, the Service now formally announced in this Notice that an “account transcript” is an alternative method of obtaining that finality without the need for the Service to issue a closing letter. An account transcript is a computer generated report that contains detailed information about the procedures that have been undertaken by the Service in handling a given estate tax return. Among the many details contained in this transcript is the date on which the estate tax examination was closed, identified by the computer code of “421”. In the Service’s view, the account code “421” on an account transcript is the functional equivalent to an estate tax closing letter, and should provide the same level of finality required by some state taxing authorities and probate courts.
This Notice instructs the practitioner that an account transcript can be obtained without charge by faxing Form 4506-T, Request for Transcript of Tax Return, to the Service at the fax number provided on the Form. (This is the same Form that is used to request a transcript for any type of tax return.) This Form should not be filed any earlier than four months after the estate tax return has been filed. Letters testamentary or of administration showing the authority of the executor must be provided with the Form. If the account transcript is being requested by a taxpayer’s representative, a Form 2848, signed by the taxpayer specifically authorizing the representative to request the account transcript, must also be sent with the Form. Even though there is a place on the IRS.gov website under “Tools” to “Get a Tax Transcript”, the taxpayer cannot currently obtain either an estate tax closing letter or an account transcript online. The remaining question is whether state courts and financial institutions will accept the account transcript or whether these entities will continue to require an estate tax closing letter to evidence acceptance of an estate tax return. If an estate tax closing letter is required, an estate tax closing letter may still be requested, and this Notice instructs that the way to do so is by calling the IRS at 866-699-4083.