Are you an executor or executrix for a recently deceased's estate? Or perhaps a beneficiary wondering about your inheritance Taxes? If so, then you’ve come to the right place. We are here to discuss Form 706 – United States Estate (and Generation-Skipping Transfer Tax) Return in great detail and explain what it is and why it should matter to you. If all goes as planned, by the end of this blog post, you will have gained a comprehensive understanding of Form 706, its significance in respect to estates, how one calculates the taxes associated with that estate, and when exactly one should be submitting such forms.
So buckle up–this could get confusing but we promise that at the end of our discussion around this often affliction form, you will feel confident navigating through any potential questions or issues over legislation related specifically to Form 70s.
Overview of Form 706
Form 706, or the United States Estate (and Generation-Skipping Transfer Tax) Return is a Std. IRS form used to report the transactions and value of an estate when someone has passed away. The form must be filled out by the executor/executrix of said estate and it covers any property that is owned by an individual who has died as well as any gift taxes that may need to be paid on these kinds of transfers. Furthermore, Form 706 also covers generation-skipping transfer taxes which are imposed on certain trusts that transferred money or assets from one generation to another without paying taxes on them.
Who Must File Form 706?
Form 706 must be filed by the executor/executrix of an estate if the total value of all assets, including any property left to beneficiaries and any possible generation-skipping transfer taxes exceeds $5,490,000 in 2020. If the estate is below this threshold then no filing is required (though it’s advisable that one consult a tax professional before making such decisions).
How to Calculate Estate Tax Liability on Form 706 ?
The calculation of the estate tax liability for an estate is quite complex, and it involves a number of steps. The first step is to gather all of the relevant information about the decedent and their assets from the date of death to calculate the gross estate. Once this has been established, any deductions allowed by law can then be subtracted from that amount in order to arrive at a net taxable amount. This amount is then used in order to calculate any applicable taxes due on Form 706.
When Should Form 706 Be Filed?
Form 706 must be filed within 9 months after the date of death or else there may be interest or penalties incurred on late filing (unless an extension has been granted). Furthermore, even if Form 706 is not required for an estate, the executor/executrix of said estate should still timely file IRS Form 8971 (Information Regarding Beneficiaries Acquiring Property From a Decedent) to ensure that all beneficiaries are correctly identified and reported to the IRS in a timely manner.
What Information is Needed to Complete Form 706?
In order to complete Form 706, the executor/executrix of the estate will need information relating to the decedent and their assets as well as any beneficiaries that may have inherited property. Additionally, they will also need copies of any trusts or wills associated with said estate in order to properly report on any generation-skipping transfer taxes.
Penalties for Not Filing or Late Filing of Form 706
The IRS does impose penalties for not timely filing Form 706 or for not properly reporting on an estate. These penalties can range from a simple fine to the executor/executrix of the estate being held personally liable for any taxes, interest, and penalties that were due but not paid in a timely manner.
Tips for Completing and Submitting a Successful Return with the IRS
When completing Form 706, it’s important to make sure that all information is accurate and complete. Additionally, the executor/executrix should carefully review any instructions associated with the form in order to ensure they are properly filling out the correct sections. Furthermore, they should also take their time when filing as rushing through the process or submitting incomplete information can lead to costly mistakes on the part of both them and the beneficiaries of said estate.
Common Mistakes Made when Filling Out Form 706
When filing Form 706, many executors/executrixes make the mistake of not properly calculating generation-skipping transfer taxes or failing to report certain assets. Other mistakes include incorrectly filling out schedules or forgetting to attach necessary documents. It’s important for the executor/executrix to take their time when completing this form and contact a tax professional if they are unsure as to what information needs to be reported.
Conclusion
Form 706 is an important form to understand if you are dealing with a recently deceased’s estate or inheritance Taxes. We hope this article has provided you with the necessary information about Form 706 – United States Estate (and Generation-Skipping Transfer Tax) Return so that you can confidently navigate through any potential questions or concerns related specifically to Form 70. It is best to seek the advice of a tax professional if you are unsure about any aspect of the form, as it will help to ensure accuracy and compliance.
FAQs
Q: How long do I have to file Form 706?
A: You must file Form 706 within nine months after the date of death of the decedent, unless an extension has been granted.
Q: What information is needed to complete Form 706?
A: In order to complete Form 706, you will need information relating to the decedent and their assets as well as any beneficiaries that may have inherited property. Additionally, you will also need copies of any trusts or wills associated with said estate in order to properly report on any generation-skipping transfer taxes.
