New $67 User Fee for Estate Tax Closing Letters Proposed by IRS

The IRS issued Proposed Regulations (REG-114615-16) on December 31, 2020 that would establish a new user fee of $67 for authorized persons who wish to request an estate tax closing letter. 

An estate tax closing letter is a nonbinding acknowledgement by the IRS that the estate tax return has been accepted and there is no outstanding tax liability.  Executors rely on closing letters when determining that it is safe to distribute assets and close a probate estate.  In some states, an estate tax closing letter must be filed with the probate court before an estate can be officially closed.

The IRS provides that the new user fee is necessary because the volume of estate tax return filings has increased significantly, especially due to the required filing for portability. The IRS is stating that it does not does not have enough resources to keep up with the filings.  The estate tax closing letters are also offered as a convenience to the executor, making the $67 user fee appropriate to cover the costs incurred by the IRS in issuing the letters.

In order to reduce the burden associated with the new user fee, the Treasury Department and IRS intend to implement a one-step, web-based procedure for requesting estate tax closing letters and paying the user fee.  The IRS claims that this will also increase the convenience of the process to request a letter.

The user fee will apply to requests for estate tax closing letters that are made 30 days after the date the Proposed Regulations are published as final in the Federal Register.

If you have any questions about estate tax closing letters or the new user fee, please do not hesitate to contact us at Schneider Downs.

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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

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