Statute of Limitations on Federal Estate Tax Returns

The statute of limitations clock begins when the IRS receives the Form 706.

A statute of limitations is a time limit placed to ensure the pursuance of legal actions in a timely manner. The Internal Revenue Code, which is part of the United States Code, also has limitations on payment of any tax due the Internal Revenue Service.

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The Internal Revenue Code requires that estate tax returns filed on Form 706 are due ​nine months after the decedent's date of death. However, on the IRS website, the IRC 6501(a) states that the statute of limitations for an estate tax returns is three years from the date it is filed.

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Consider Also​: What Happens if You Don't File Taxes?

Standard Three Year Limit

The Internal Revenue Service has a general statute of limitations for all tax returns, including estate tax Form 706, of ​three years​ beginning on the filing date of the return with the Internal Revenue Service. If the Internal Revenue Service does not start a court proceeding to collect any tax due or submit a tax assessment within three years of receipt of the return, then limitations apply.

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There are exceptions to the three year rule where the United States Code gives the Internal Revenue Service broader powers and will open the three year limitations period to a longer time.

Six Year General Limit

If a filed estate tax return Form 706 omitted items from the return that were in excess of ​25 percent​ of the gross estate, the Internal Revenue Service may asses the tax or begin a court proceeding to collect the tax without an assessment, for a period of ​six years​ after the date of filing the return with the Internal Revenue Service. If a personal representative discovers a substantial error on an estate tax Form 706, amend the return immediately to correct the error so as not to subject the return to the six year statute of limitations.

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No Limit on Fraud and Tax Evasion

If there is a willful attempt to evade tax due or to defraud the Internal Revenue Service, there is no statute of limitations. If a filed estate tax return Form 709 was fraudulent or not filed in an attempt to avoid tax, the Internal Revenue Service can assess the tax or start a court proceeding for tax collection at any time.

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Consider Also​: Tax Audits: What Are They, Why are You Audited, & IRS Audit Outcomes

Form 706 and Form 709

The filing of an estate tax return requires both Form 706 and Form 709, but what is the difference? Before an individual passes away, they will have a last testament or will featuring specific instructions on what to do with any estates in their name.

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When that person dies, the executor of the the will, uses Form 706 to figure out the estate tax specified in Chapter 11 of the IRC. Meanwhile, Form 709 is used to report to the Federal government when there is a transfer of special kinds such as the generation-skipping transfer (GST) or if the estate falls under the Federal gift tax situation.

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Proof of Receipt

Except in the case of fraud and tax evasion, the statute of limitations clock begins ticking upon receipt of the estate tax return Form 709 by the Internal Revenue Service. It is always a good idea for the personal representative of an estate to mail the Form 709 certified United States mail with a return receipt requested.

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A certified mail receipt is the best defense regarding the beginning date of the statute of limitations should the Internal Revenue Service attempt any action after expiration of the limits under the Internal Revenue Code 6501(a).

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