Accessibility Skip to Top Navigation Skip to Main Content Home  |  Change Text Size  |  Contact IRS  |  About IRS  |  Site Map  |  Español  |  Help  

Part 5. Collecting Process

Chapter 5.  Decedent Estates and Estate Taxes

Section 5. Processing Estate Tax Extensions

5.5.5  Processing Estate Tax Extensions

5.5.5.1  (12-29-2009)
Section Overview Request for Extension of Time to Pay Estate Tax

  1. Internal Revenue Code (IRC) § 6161 provides decedents' estates that file Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, the option of securing an extension of time to pay when specific circumstances impede their ability to pay the total tax due by the return due date. This section provides background information and procedures for processing of IRC § 6161 extension requests.

  2. Taxpayers submit Form 4768 , Application for Extension of Time to File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes, for an extension of time to file or pay Estate Tax. Advisory and the Estate & Gift tax unit of Cincinnati Compliance Services process Forms 4768 that request extensions of time to file and/or to pay.

  3. Relevant provisions of IRC § 6161 and related regulations for extensions of time to pay estate tax are:

    1. The maximum extension of time to pay that may be granted at one time is 12 months.

    2. Additional extension requests can be granted for up to 12 months at a time for a maximum of 10 years, for tax determined by taxpayer on return. On amounts determined as deficiency, the extended time for payment cannot exceed four years from the date fixed for payment (see IRC 6151(c))of the deficiency, for up to one year at a time.

      Note:

      Different extension periods may apply for different assessments.

    3. A request for extension of time to pay must be in writing and received no later than the due date of the return, or in the case of a subsequent extension request, the extended payment date.

    4. Requests must include a statement of reasonable cause or undue hardship.

    5. No extension shall be granted for any deficiency if the deficiency is due to negligence, to intentional disregard of rules and regulations, or to fraud with intent to evade tax.

      Note:

      An extension of time to pay does not extend the time to file.

    6. The granting of an extension of time for payment of the tax will not relieve the estate from liability for the payment of interest during the period of the extension.

    7. The application will be examined, and within 30 days, if possible, will be denied, granted, or tentatively granted subject to certain conditions of which the taxpayer will be notified.

      Note:

      For extensions of time to pay an installment of tax deferred under IRC § 6166, see IRM 5.5.5.5.

5.5.5.2  (12-29-2009)
Collection Statute Expiration Date under IRC § 6503(d)

  1. Under IRC § 6503(d) , the Collection Statute Expiration Date (CSED) is suspended for the period of any extension of time for payment that is granted (also see IRM 5.1.19.3.12).

  2. TC 468 is input on IDRS to identify accounts that may have been granted additional time to pay estate taxes due under IRC 6161.

  3. Generally the CSED is extended for the period of time between the TC 468 date and the TC 469 date, which reflects expiration of the extended time to pay.

  4. CSED's should always be checked when working estate tax accounts. Different CSED's may run on different assessments. IDRS does not update the CSED.

5.5.5.3  (12-29-2009)
Processing Responsibility of Forms 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes.

  1. All requests for extension to file and pay involving unfiled tax returns in which the estate anticipates a cash shortage to pay taxes that will become due of $25,000.00 or more will be sent to Advisory for approval consideration.

  2. Extension requests on unfiled returns where the estate sends payment of the estimated liability with the request (payment and estimated tax are equal) will not be sent to Advisory; requests where the estimated tax is not paid will be sent to Advisory if the estimated liability is $25,000.00 or more

  3. All requests for extensions to pay on accounts in which the tax return has been filed and reflect a balance due over $50,000.00 will be sent to Advisory.

  4. All extensions to pay where it is the third request, regardless of dollar amount, will be sent to Advisory.

  5. All requests for extension of time to pay annual installments that are deferred under Internal Revenue Code (IRC) § 6166 will be sent to Advisory.

  6. All other requests that do not meet the above criteria will be processed by the Estate & Gift Tax unit of Cincinnati Compliance Services.

5.5.5.4  (12-29-2009)
Evaluating Requests for Extensions of Time to Pay

  1. Employees must determine on a case by case basis whether to allow a request for an extension of time to pay, and if so, the length of time for such extension.

  2. Employees will be expected to evaluate reasonable cause statements on extension requests in which the estate has requested the automatic six month (6) extension to file and a non-automatic twelve month (12) extension to pay tax due upon filing.

  3. If the reasonable cause statement sent by the estate provides details (see instructions to Form 4768 ) explaining why it is unable to determine the tax liability or the liquidity of assets, it may be reasonable to limit approval of the extension of time to pay to six months. This corresponds with the extended due date of the estate tax return; making it reasonable to expect that the executor will know the tax liability and liquidity of assets by the end of that six month period.

  4. If the executor then needed additional time to pay the estate tax, another request could be made on Form 4768.

  5. If the estate indicates no tax will be due it may be reasonable to deny a request for extension of time to pay when the taxpayer believes in good faith that no liability is owed. Although an estate's request for an extension of time to pay may state that no liability will be due with the return consideration will be given to the reasonable cause explanation in evaluating these requests for an extension to pay.

  6. Extension to pay requests that lack a reasonable cause statement will be allowed an additional fifteen (15) calendar days to perfect the reasonable cause statement. The employee reviewing the request will send a letter to the executor requesting additional information and will document the extended time allowed in the case history. If a timely response is not provided from the estate the request will be denied.

  7. An extension of time to pay may be granted for a reasonable period of time if an examination of all facts and circumstances discloses that such request is based upon reasonable cause. The following examples illustrate cases involving reasonable cause for granting an extension of time (also see Reg. 20.6161-1(a)(2)for undue hardship criteria):

    1. The estate contains enough liquid assets to pay the tax but the assets are located in several places and the executor cannot take control of them in time to pay the tax by the due date.

    2. Much of the estate consists of assets that provide for payment in the future (e.g., annuities, copyright royalties, contingent fees, or accounts receivable). Currently they do not produce enough cash to fully pay by the due date. Borrowing against these assets has proved not to be possible, and sale of these assets at a discount would greatly decrease the value of the estate.

    3. The estate includes a claim to substantial assets which cannot be collected without litigation. The value of the gross estate is undetermined so tax cannot be paid (or even computed) when the tax is due.

    4. The estate does not have enough money (without borrowing at a rate of interest substantially higher than that generally available) to pay all the tax and other claims against the estate while providing funds for the decedent’s dependents during the period of administration. The executor has made reasonable attempts to convert assets into cash.

  8. In addition to establishing reasonable cause, these cases require an analysis of the progress of efforts being made to borrow or liquidate assets or to otherwise pay the amounts to be extended. Some suggested additional information required in this analysis include:

    1. Balance sheets listing all assets, disbursements, liabilities and earnings for the estate. This documentation should be compared to any submitted for a prior extension period, to determine what has been liquidated during the extension period. Real estate should be listed with the value and location identified (city, county, and state).

    2. An accounting of the actions taken during the past extension period to resolve the indebtedness. Examples include marketing property, resolving suits, or seeking loans.

    3. Information on the executor’s proposal to make partial payments during the extension being requested.

    4. Consideration should be made as to whether the estate has complied with the conditions set for granting prior extensions.

    5. Evaluation of what assets remain under the protection of the IRC § 6324 lien; determine if assets have been distributed or discharged.

    6. An analysis should be made to determine if there is sufficient value or equity in the remaining assets relative to the amount of tax remaining.

  9. Most requests for an extension to pay are necessary because the estate representative or executor needs additional time to liquidate what are often very valuable properties that cannot be marketed within the 9 month period following the death of the taxpayer. Provided the executors verify that all steps necessary to sell property to pay the tax are being taken in an expeditious manner, and that all liquid assets not needed for the payment of anticipated administrative expenses are paid over, extensions to pay may be granted only for the amount of the cash shortage.

  10. When evaluating extension to pay requests bear in mind that denial of the request may have adverse financial ramifications to the estate far in excess of the failure to pay penalty which will begin to accrue if the request is denied. Under IRC § 2011(c), for state death taxes to be deductible as an expense on Form 706, they must be paid within 4 years from the date the Form 706 is filed, or until the expiration of any extension to pay under IRC § 6161 or §  6166, whichever date is later. If the estate tax liability has been in extension to pay status (status 14) for more then 4 years from the filing of Form 706, the estate will be unable to claim as a deduction any subsequent state death tax payments if further extension to pay requests are denied.

5.5.5.5  (12-29-2009)
Requests for Extension to Pay Tax Deferred under IRC § 6166

  1. All requests for an extension to pay an annual installment of tax deferred under IRC § 6166 will meet the guidelines for referral to Advisory. The same reasonable cause criteria apply to these requests.

  2. A request relating to the annual installment will not be considered unless the extension is applied for on or before the date fixed for payment of the tax or installment.

  3. If the estate is unable to pay the annual installment payment or non-deferred tax this is an indicator/factor that the estate may be financially unstable. At this time the advisor will conduct an evaluation of the current assets, review time remaining on the IRC § 6324(a) lien (or any other lien that may be in effect such as the IRC § 6324A lien) and determine if the Government is adequately secured for the remaining tax due during the duration of the deferral period. Refer to acceleration procedures in IRM 5.5.6 if it is determined necessary to proceed with collection of the deferred portion of tax.

  4. Revenue officers may continue collection actions on the non-deferred portion of estate tax while the deferred portion is being accelerated.

5.5.5.6  (12-29-2009)
Advisory Actions (Form 4768)

  1. Advisory will analyze extension requests to ensure that the government’s interests are protected before an additional extension of time is granted.

  2. When received, the application will be examined, and if possible, within 30 days will be denied, granted, or tentatively granted subject to certain conditions of which the executor will be notified.

  3. Create an ICS Non-Field Other Investigation (NFOI) with Action Requested type "199-Ext Time to Pay (4768)" upon receipt of the extension request.

  4. Contact the executor within 30 days of the date of the extension request to:

    1. advise them that you are reviewing the request,

    2. gather information to support your determination, and

    3. estimate the date of completion.

  5. Generate an ICS Other Investigation (OI) to a revenue officer for cases that require field contact, valuation of property, or administrative remedies.

  6. If, in the judgment of the Advisor evaluating the extension request, granting an extension to pay may put the interest of the government at risk, under IRC § 6165 granting of the extension can be conditioned upon the estate posting a bond.

  7. The filing of a Notice of Federal Tax Lien should also be considered if there are assets attached by the IRC § 6321 lien, and if all of the statutory requirements for creation of the assessment lien have been met. See IRM 5.5.7.4 for further information on lien filing consideration. Letters such as 2568-C or CP 504 meet demand for tax due requirements and documentation of letters sent can be found in the TXMOD history of the IDRS account.

  8. Maintain a file of all approved and rejected Forms 4768. Documents may be destroyed 2 years after statutory period for collection has expired, according to the Records Control Schedule for Collection included in IRM exhibit 1.15.28.-1(#54).

  9. Counsel may be consulted on cases with:

    1. Requests for an extension of payment of interest on IRC § 6166 cases.

    2. Provisions of 31 U.S.C. § 3713, fiduciary or transferee liability

    3. Administrative remedies based on the IRC § 6321 lien (e.g., filing of a Notice of Federal Tax Lien, Notice of Levy, and/or seizure of property or property rights).

5.5.5.7  (12-29-2009)
Approval of Requests for Extension of Time to Pay

  1. If all issues are resolved in favor of an extension, complete part V of Form 4768 to notify the executor that the request has been approved and of any conditions/actions that are required. Forward to the Group Manager for review and approval.

  2. Mail the approved original Form 4768 to the taxpayer and mail a copy, via Form 3210, to Cincinnati Campus Estate & Gift tax unit for input of the TC 468 on IDRS. Retain a copy with the Advisory case file. Campus E&G will monitor the extension until expiration of the period granted, and the OI on ICS should be closed.

  3. Document the ICS history with a summary history entry containing a statement of findings and any specified actions that were a condition of the decision to approve the extension request.

5.5.5.8  (12-29-2009)
Denial of Requests for Extension of Time to Pay

  1. If the request is denied, complete part V of Form 4768 giving the reason for denial, appeal rights and the return address for the proper Advisory office. The statement concerning Appeal rights should include the following information:

    • Send your appeal to the address as advised on the second page of Form 4768

    • Send your appeal by registered or certified mail, and

    • File your appeal within 10 days after the denial is mailed to the executor.

  2. Forward to the Group Manager for review and approval; after approval mail the estate representative the signed Form 4768. Retain a copy of the case file for use in preparing a rebuttal if the denial of the extension is appealed. Keep the OI open, with a scheduled follow up for at least 25 days after forwarding to allow time for the executor to appeal (10 days) and mailing time (15 days).

  3. Document the ICS history with a summary history entry containing a statement of findings and reasons to support the decision to deny the extension request.

  4. If the executor does not appeal the denied extension, mail a copy of the Form 4768, via Form 3210, to Cincinnati Campus Estate & Gift tax unit for input of the TC 469. (For related information on transaction codes 468, 469 and closing codes see IRM 4.25.2.1.3(12) and (13)). The OI on ICS should be closed.

  5. A written appeal may be made to the advisor within ten days after the time the denial is mailed to the executor.

  6. The appeal is considered filed on the date it is postmarked. If the due date falls on a Saturday, Sunday or legal holiday, it will be considered timely if postmarked by the next business day.

  7. If an appeal is received in Advisory, the advisor will date stamp the protest and verify the protest was filed timely.

  8. The advisor will forward a file containing the following information to Appeals:

    • executor or power of attorney information

    • any forms 4768

    • all correspondence between the Service and the estate representative relating to the extension request

    • protest from the estate representative

  9. This file will be forwarded on a Form 3210 to the Office of Appeals for the state of the decedent's last domicile using the Case Routing List on the Appeals website, http://appeals.web.irs.gov/APS/bystate2.htm, with the understanding the case may be transferred to another Appeals office based on Appeals inventory needs.

  10. Notify Cincinnati Campus Estate & Gift tax unit that the estate has requested an appeal so that the account remains in status 14 and payment due notices are not sent during the appeals process.

  11. The Appeals Office will send the case file and the Case Memorandum to the originating Advisor and a copy of the Case Memorandum to Campus once the decision is final, so that E&G Campus can proceed with billing. If no response Advisory or Campus will follow up with Appeals in 90 days. Contact can be made with the Appeals' Account Resolution Specialist at (559) 456-5931 to locate a case or update status.


More Internal Revenue Manual