Instructions for Filling Out Form 706

Instructions for Filling Out Form 706

Written by 
Pilot Team
December 8, 2023
Instructions for Filling Out Form 706

This document offers comprehensive instructions for completing Form 706, the United States Estate (and Generation-Skipping Transfer) Tax Return, for decedents dying in September 2023. It covers filing requirements, calculating estate and generation-skipping transfer taxes, claiming deductions and credits, and addressing specific situations like portability of DSUE, generation-skipping transfer tax, and qualified conservation easement exclusion.

In this article, we'll provide information on Form 706 and a step-by-step guide on how to fill it out, ensuring a complete and accurate return.

What is Form 706?

Form 706, the United States Estate (and Generation-Skipping Transfer) Tax Return, is used by the executor of a decedent's estate to calculate the estate tax imposed on the entire taxable estate, not just the share received by a specific beneficiary. Additionally, it is utilized to figure the generation-skipping transfer (GST) tax on direct skips. The form requires detailed information about the decedent's assets, deductions, and tax computations, and includes schedules for specific types of assets and deductions. Its purpose is to calculate the estate tax due on the decedent's estate, which encompasses all property the decedent had an interest in at the time of death, as well as certain transfers made during their life.

Who Must File Form 706?

Form 706 must be filed by the executor of the estate of every U.S. citizen or resident whose gross estate, plus adjusted taxable gifts and specific exemption, is more than $12,920,000 for decedents dying in 2023. Additionally, it must be filed if the executor elects to transfer the deceased spousal unused exclusion (DSUE) amount to the surviving spouse, regardless of the size of the decedent's gross estate.

Form 706 Tax Filing Deadlines and Due Dates

  • The due date for filing Form 706 is generally 9 months after the date of the decedent's death.
  • An automatic 6-month extension of time to file can be requested using Form 4768.
  • Executors who did not have a filing requirement under section 6018(a) but failed to timely file Form 706 to make the portability election may be eligible for an extension under Rev. Proc. 2022-32, allowing them to file Form 706 on or before the fifth anniversary of the decedent’s death.
  • Protective elections for special-use valuation can be made by checking “Yes” on line 1, writing the word “protective,” and filing Form 706 using regular values. This election must be made no later than 1 year after the due date (including extensions actually granted).

Form 706 Late Payment Penalty

If the estate tax due on Form 706 is not paid by the due date, a late payment penalty may be imposed. The penalty rate and calculation method are not directly provided in the instructions, but can be found in the Internal Revenue Code or IRS guidance on penalties for late payment of estate taxes. To avoid penalties, it is crucial to pay the estate tax on time and in full.

Step-by-Step Instructions for Form 706

Step by Step Instructions for Filling Out Form 706:

  1. Future Developments: Check the IRS website for the latest information about developments related to Form 706 and its instructions.
  2. What's New: Review any updates or changes to the form or filing requirements for the current year.
  3. General Instructions: Understand the purpose of Form 706, determine if the estate needs to file, gather information about the gross estate, identify the executor, and note the filing deadline and where to file.
  4. Specific Instructions: Follow the detailed instructions provided for each part and schedule of Form 706. This includes how to report real estate, stocks and bonds, mortgages and notes, insurance, jointly owned property, miscellaneous property, transfers during the decedent's life, powers of appointment, annuities, funeral expenses, debts of the decedent, mortgages and liens, net losses during administration, bequests to surviving spouses (marital deduction), charitable, public, and similar gifts and bequests, credit for foreign death taxes, credit for tax on prior transfers, generation-skipping transfer tax, and qualified conservation easement exclusion.
  5. Notices: Read the Privacy Act and Paperwork Reduction Act Notice for legal information and the estimated time needed to complete the form.
  6. Additional Material: Use the index and checklists provided to ensure that all necessary information is included and that the form is complete and accurate before filing.

How to Submit Form 706

To submit Form 706, complete the required sections, including Schedules A through I, detailing the decedent's assets and deductions. Determine the generation-skipping transfer (GST) tax liability using Schedules R and R-1, if applicable. Calculate the estate tax using the Tax Computation section on page 1 of Form 706. Sign the return at the bottom of page 1, and ensure the preparer signs if applicable. Attach all required documentation, such as the death certificate, certified copy of the will, appraisals, trust documents, and relevant forms. Finally, file Form 706 by the due date, including any extensions granted.

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