There has been enormous uncertainty over the due date for tax returns for people who died in 2010. The IRS answered that question on September 13, 2011, with litttle time to spare.The IRS has released Notice 2011-76, which extends the filing deadline for Forms 706 and 8939 for estates of decedents dying in 2010.

The Notice provides that the executors for estates of people who died in 2010 will have until early next year to file estate tax returns, final income tax returns, and other various required returns. In addition, executors will have until early next year to pay any estate taxes that might be due. The IRS is also providing penalty relief to certain beneficiaries of these estates on their 2010 federal income tax returns.

The purpose behind this decision is to give time to executors to comply with important tax law changes that were only enacted late in 2010. Specifically, the following relief is given:

Large estates that are going to opt out of the estate tax will have until Tuesday, January 17, 2012, to file Form 8939. Without this Notice, that return would have been due on November 15, 2011. Even better, because this is a change in the due date, and not merely an extension of time to file, no form requesting an extension needs to be filed with the IRS to have this new due date apply.

2010 estates that are not opting out of the estate tax can request an extension of time, using Form 4768, until March 2012 to file their estate tax returns and pay any estate tax due. While normally the IRS will automatically grant a six-month filing extension to estates filing this form, extensions to pay the tax are granted only for good cause. As a result, most 2010 estates that timely file Form 4768 will have until Monday, March 19, 2012 to file Form 706 or Form 706-NA . (For estates of those dying during the last two weeks of 2010, the due date is 15 months after the date of death.) No late-filing or late-payment penalties will be due, though interest still will be charged on any estate tax paid after the original due date.

Special penalty relief is provided to many individuals, estates, and trusts that already filed a 2010 federal income tax return, or obtained an extension and plan to file by the October 17, 2011, extended due date. Late-payment and negligence penalty relief applies to persons inheriting property from a decedent dying in 2010, who then sells the property in 2010 but improperly reports gain or loss because they did not know whether the estate made the carryover basis election.

If you would like to read the notice, you can see it at http://www.irs.gov/pub/irs-drop/n-11-76.pdf.

Please note that this brief article is no substitute for legal advice from a lawyer based on your particular circumstances. For more information, please contact us at (301) 656-6905 or by email at mail@lsslawyers.com.