No Closing Letters to Be Issued for Estate Returns Filed After June 1, 2015 Unless Taxpayer Specifically Makes a Request

The IRS announced a change in policy regarding estate tax closing letters in their web pages.  On the page labeled “Frequently Asked Questions on Estate Taxes” (FAQ) the IRS announced that for estate returns filed on or after June 1, 2015 the IRS will no longer automatically issue closing letters.

For returns filed after June 1, 2015 the IRS will only provide closing letters if requested by the taxpayer.  The FAQ does not contain information about how taxpayers are to initiate such requests or details of the process, including whether the IRS plans to charge a user fee for obtaining such a letter.

What the FAQ does tell taxpayers is:

  • No request should be made until four months after the return has been filed (presumably the IRS will deny any such requests made during that period on the theory that the IRS has had insufficient time to process the return and made any sort of determination whether the return will be selected for examination)
  • Taxpayers looking for more information should call (866) 699-4083.

Advisers will need to explain to executors and personal representatives this change in IRS procedures as well as discuss the pros and cons of seeking a closing letter once the IRS clarifies the procedures.  In many cases a closing letter may either be required to obtain court consent to make a final distribution or, at the very least, be an item that an executor should obtain to protect him/herself against potential liability for taxes the IRS eventually determines are unpaid. 

As well, some tax related rules (such as the expiration of the period when an election to combine reporting of the estate and revocable trusts for income tax purposes under IRC §645 terminates) make reference to the receipt of a closing letter.  It remains to be seen if the IRS will modify regulations and guidance in those areas to deal with the fact that a closing letter is no longer an “automatic” item issued to an estate if and when the IRS decides it is not going to examine the estate.