How to File an Estate Tax Return (Form 706)

Form 706, the United States Estate (and Generation-Skipping Transfer) Tax Return, is a federal tax document filed with the Internal Revenue Service (IRS) for a deceased individual’s estate. It calculates federal estate tax liability owed on the transfer of a decedent’s assets. It is prepared by the estate’s executor. The form accounts for the estate’s total value, including all property and assets owned at the time of death.

Determining the Filing Requirement

An estate tax return must be filed if a U.S. citizen or resident’s gross estate, combined with adjusted taxable gifts, exceeds the federal estate tax exemption for the year of death. For individuals dying in 2025, this exemption stands at $13.99 million. For married couples, the combined exemption can be as high as $27.98 million.

The “gross estate” includes all property the decedent owned at death, regardless of location. This includes real estate, stocks, bonds, business interests, bank accounts, and personal property. It also includes assets not passing through probate, such as life insurance proceeds or jointly owned property with rights of survivorship. The gross estate also includes certain lifetime transfers where the decedent retained an interest.

Even if no estate tax is due, an estate may still need to file Form 706. This is relevant for married couples electing portability of the deceased spousal unused exclusion (DSUE) amount. Portability allows a surviving spouse to use any unused portion of their deceased spouse’s estate tax exemption, increasing their own future exemption. To make this election, a timely and complete Form 706 must be filed, even if the estate’s value is below the filing threshold.

Gathering Necessary Information and Documents

Preparing Form 706 requires specific information and supporting documentation to report the estate’s assets and liabilities. Personal details of the decedent are needed, including full name, Social Security number, date of death, and last known address. Executor information, such as name, address, and Social Security number or EIN, is also required.

Records are essential for valuing all gross estate assets at fair market value as of the date of death. This involves gathering bank statements, brokerage statements for stocks and bonds, and deeds or titles for real estate. For complex assets like business interests or unique personal property, professional appraisals may be necessary. Life insurance policies and retirement account statements are also important for including proceeds or balances in the gross estate.

Documentation for all potential deductions must be assembled. This includes receipts for funeral and administrative expenses, such as attorney fees, accountant fees, and executor commissions. Records of the decedent’s debts, including mortgages and loans, are needed. Documentation supporting charitable bequests or property passing to a surviving spouse for the marital deduction must be collected.

Information on lifetime gifts exceeding the annual gift tax exclusion is important, as these may reduce the estate tax exemption. Copies of the decedent’s final income tax return (Form 1040) and any previously filed gift tax returns (Form 709) are valuable for cross-referencing. Organizing these documents ensures all necessary data is available for completing the return.

Completing Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return

Completing Form 706 involves entering financial information onto its various parts and schedules. Part 1 requires identifying details for the decedent and executor.

The gross estate is reported across Schedules A through I, with each schedule dedicated to specific asset types. Schedule A is for real estate, requiring descriptions and fair market values. Stocks and bonds are on Schedule B, listing company names, shares, and market values at death. Cash, mortgages, and notes are on Schedule C; life insurance proceeds on Schedule D. Jointly owned property is on Schedule E; miscellaneous property (personal effects, collectibles, business interests) on Schedule F. Lifetime transfers included in the gross estate are on Schedule G. Property with a power of appointment is on Schedule H; annuities on Schedule I. Accurate descriptions and fair market values as of the date of death are required for each asset.

After asset reporting, permissible deductions are entered on Schedules J, K, L, M, and O. Schedule J is for funeral and administration expenses, such as executor commissions and attorney fees. Debts and mortgages on estate property are on Schedule K. Schedule L accounts for net losses during administration and expenses for property not subject to claims. The marital deduction (for property passing to a surviving spouse) is on Schedule M; charitable bequests on Schedule O.

After accounting for assets and deductions, the form guides the executor through the tax computation section. This involves calculating the taxable estate, considering adjusted taxable gifts, and applying the unified credit to determine the final estate tax liability.

Filing the Return and Making Payment

After completing Form 706 and its schedules, submit it to the IRS and arrange for any tax payment due. The federal estate tax return is due nine months after the decedent’s death. An automatic six-month extension to file can be requested by submitting Form 4768 before the original due date. An extension to file does not extend the time to pay tax; payment is still required by the original nine-month deadline to avoid penalties and interest.

Form 706 must be filed by mail, as electronic filing is not available. For returns sent via U.S. Postal Service, mail to Department of the Treasury, Internal Revenue Service, Kansas City, MO 64999. If using a private delivery service, send to Internal Revenue Service, 333 W. Pershing Rd., Kansas City, MO 64108. Use a method that provides proof of mailing and delivery.

Estate tax due can be paid through various methods. Payments can be made electronically via EFTPS or IRS Direct Pay. Alternatively, a check or money order payable to the “United States Treasury” can be mailed with the return. When paying by check, include the decedent’s name, Social Security number, and “Form 706” on the check.

Post-Filing Considerations

After Form 706 is filed, the IRS reviews and processes the return. Many returns are accepted as filed, but some may be selected for audit. Estates with higher values or complex assets are more likely to be audited. An audit typically involves the IRS requesting additional documentation or clarification regarding reported values or deductions.

The statute of limitations for the IRS to assess additional estate tax is three years from the filing date. During this period, the IRS may send inquiries or initiate an audit. Should an audit occur, promptly providing requested information and maintaining clear communication can facilitate the process.

Upon completion of the IRS’s review, or if requested, the estate may receive an estate tax closing letter (Letter 627). This letter confirms the IRS has accepted the return as filed or after adjustments. While it indicates the IRS’s examination is closed for estate tax purposes, it is not a formal closing agreement and does not prevent reopening the case under certain circumstances, such as fraud or substantial error. Effective July 1, 2025, there is a $56 user fee to request an estate tax closing letter. Maintaining thorough records of all documents, calculations, and communications related to the estate tax return is important for future reference.