Estate tax returns can be audited just like any other tax return. However, there are some unique issues to consider when you’re involved in an estate tax audit.
Reasons for Audit
Larger estates are more likely to be audited. Estates valued below $11.4 million in 2019 may not even need to file an estate tax return, although there are sometimes reasons to file an estate tax return even if no estate tax will be owed.
Sometimes returns are audited because they do not provide complete information and supporting documentation. The IRS will want proof to support all valuations, deductions, and credits. A failure to include this information could increase your audit risk. Inconsistencies on the return or between the return and the decedent’s will are also red flags that could cause an audit.
Many estate tax controversies also arise due to valuation of certain assets, particularly closely held businesses and family limited partnerships. These entities can be valuable for estate planning purposes, but there are many complex rules that must be carefully followed. If a taxpayer doesn’t understand these rules or is too aggressive in maintaining control, the IRS may include the full value of these assets in their estate.
There are many other reasons estate tax returns are audited, but more valuable estate with more complex assets are generally more likely to undergo an audit.
The Estate Tax Audit Process
Many similar rules apply to regular tax audits and estate tax audits, such as:
- The three-year statute of limitations to assess additional tax.
- The right to go to IRS Appeals if you disagree with your examiner.
- The right to file a petition in Tax Court if your appeal is unsuccessful and you want to continue to fight the tax assessment.
If you are the executor or personal representative of an estate that is under audit, you don’t have to handle the audit process alone. A tax attorney can handle your audit defense. In many cases, the attorney can deal with the IRS on your behalf without your presence.
Contact an attorney as soon as you receive an audit notice and before you talk to the IRS.
The Gartzman Law Firm can help you with estate tax audits and other IRS tax problems. Use our contact form to request a consultation with an Atlanta tax resolution attorney.