If you lost a loved one in 2010, my sympathies are with you. If you lost a loved one in 2010 that might have a taxable estate, my sympathies are really with you. The “surefire vote getting” one year repeal of the federal estate tax for 2010 has turned into one of the biggest administrative nightmares that tax practitioners have seen in awhile. And now, more than 9 months after the “repeal” ended, the IRS finds itself in the position of offering guidance and extensions – and adding to the confusion – on the tax.
Let me get you up to speed. For years, we had a federal estate with a relatively low personal exemption amount (stuck at $600,000 for eons). Under the Clinton administration, the personal exemption was increased over a period of about ten years to $1,000,000. Under the Bush administration, the personal exemption was accelerated to $3,500,000 in 2009 with no federal estate tax in 2010. Under the Obama administration, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 brought back the federal estate tax for 2010, sort of. Large estates have the option of electing federal estate tax treatment using a $5 million exemption for 2010 – and keeping the coveted “step up” in basis. However, instead of opting in to federal estate tax treatment under the new law, estates must opt out. If an estate opts out of the federal estate tax for decedents who died in 2010, the step-up in basis in assets for income tax purposes is limited.
The oddities in the law mean that the IRS has found itself scrambling to develop forms and guidance for one year – thanks, Congress, that’s efficient.
In March, the IRS announced that the form 8939 wasn’t actually due on April 18, 2011, after all – which was good since there was no form 8939 available. In August, the IRS released some guidance on the form 8939 – but still no form.
Now, the IRS has announced that estates which opt out of the federal estate tax for 2010, now will have until Tuesday, January 17, 2012, to file the mysterious form 8939 (still not available). The prior deadline was November 15, 2011.
Additionally, estates of most decedents who died in 2010 and have timely requested an extension will have until March 19, 2012 to file their estate tax returns and pay any estate tax due. For estates of decedents who died December 16, 2010 and before January 1, 2011, the due date is 15 months after the date of death.
If your head is spinning by now, you’re not alone. For more information about extensions and penalty relief, check out Notice 2011-76 (downloads as a pdf).
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