Monday, January 11, 2021
Typically, a fiduciary will not know the amount of estate taxes due until (1) the statute of limitations has run or (2) there is an audit. This makes it tough for fiduciaries and beneficiaries because often times they will need to hold back on distributions until they know what the tax amount will be. This is also an unfair practice, as fiduciaries are left in the dark.
In order to assist fiduciaries in determining tax amounts and due dates, the IRS typically has issued an estate closing letter when an estate tax return is filed. However, some years ago, the IRS stopped automatically providing closing letters, mostly to save costs.
Given the helpful nature of closing letters, fiduciaries could still access them upon request. Now, the IRS has proposed that a $67 user fee be required upon request of a closing letter. "[I]t is always irksome when the government charges members of the public before the government will discharge its duty. In this case, that is particularly so since it is the liability that the government imposes on fiduciaries (both in their fiduciary capacity and their individual capacity) that necessitates a closing letter."
As of now, there is till no fee for a closing letter, but we will see if that changes!
See Charles (Chuck) Rubin, IRS Is Proposing a User Fee for Estate Tax Closing Letter, Rubin on Tax, January 2, 2021.
Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.