Estate Tax Audits

If you have filed an estate tax return, you should know the IRS audits 9% of the returns that report a gross estate of $5.00 or more. The larger the estate return, the more likely the IRS will perform an audit. Ironically, most states have their own auditing teams pushing the 9% federal rate to more than double that for the likelihood of a state audit.

 

Our tax attorneys  and have extensive experience in the preparation of filing estate tax returns. We evaluate every aspect of your estate tax to help protect your assets and work tirelessly to maximize your tax benefits. If you have received a notice of audit, please call us right away for a consultation.

 

If your estate tax return is audited, the audit is usually completed within 18 months of filing. If the IRS finds additional assets, or if an error is discovered in the original return, the audit can take several years to complete.

 

When preparing the estate tax returns, there are, as with any tax, specific triggers that can set an audit in motion.  At the top of that list is ‘not enough information’.  When a question isn’t answered on the return or a description of an asset is vague or not answered, the IRS may view this as being carelessly prepared, or the true value of an asset isn’t verifiable. The return should have the documentation to back up the information whenever and wherever required.

 

The IRS will also review the decedent’s (deceased) background, the lifestyle, gifts and all the assets along with any unequal distributions or assets that were used for the donor’s living expenses.

 

Appraisals have to be done for any gift. These appraisals will undergo extreme scrutiny. Because estate and gift tax returns are individually reviewed, they will look for unusual items such as large charitable donations, large deductions, math errors and large discounts.

 

The IRS will carefully review the estate tax return for any kind of inconsistency.  An example may be a will bequeathing a certain piece of property but that property isn’t reported on the tax return. The IRS will jump on that deviation. Another example is if the deceased had a business where he worked from home but none of the business furnishings, machinery or equipment is reported on the return.

 

There are, of course numerous questionable areas the IRS will consider for review. Examples are: prior gifts that are re-evaluated, claims against the estate by heirs, extravagant fiduciary commissions, supporting documentation for appreciated property in non-taxable estates, tax allocation clauses and retained interests.

 

We, at Gantenbein Law Firm focus on serving our clients with the finest legal service to create lasting relationships.  Our tax lawyers are also experienced estate planning, wills, and trusts attorneys and are well-qualified in estate tax audit matters. We encourage you to contact our firm with any questions you may have.