A primer on Form 706 for calculating estate taxes.
If you are joining us for IRS Form 706.
What is form 706?
IRS form 706 is a tax form used to calculate estate taxes. When a US citizen dies and passes on an estate to their descendants, the estate is taxed. For example, if your grandfather dies and passes on an estate to you worth $10,000 - that $10,000 is taxed at a certain rate. Form 706 is used to calculate this rate.
Who needs form 706?
This form is typically used by estate executors. An estate executor is someone who the deceased trusted to take care of their estate after they passed. This could be anyone from a lawyer to a family member. The executor will enact the deceased’s will, distribute the estate, and ensure that the proper taxes are paid. In rare cases, the descendents may file the form themselves.
What other forms accompany form 706?
There are many forms and schedules that accompany form 706. The IRS lists them as follows…
1. Part 1 - Decedent and Executor
2. Part 2 - Tax Computation
3. Part 3 - Elections by the Executor
4. Part 4 - General Information
5. Part 5 - Recapitulation
6. Part 6 - Portability of Deceased Spousal Unused Exclusion (DSUE)
7. Schedule A - Real Estate
8. Schedule A-1 - Section 2032A Valuation
9. Schedule B - Stocks and Bonds
10. Schedule C - Mortgages, Notes, and Cash
11. Schedule D - Insurance on the Decedent's Life
12. Schedule E - Jointly Owned Property
13. Schedule F - Other Miscellaneous Property
14. Decedent Who Was a Surviving Spouse
15. Schedule G - Transfers During Decedent's Life
16. Schedule H - Powers of Appointment
17. Schedule I - Annuities
18. Schedule J - Funeral
19. Schedule K - Debts of the Decedent and Mortgages and Liens
20. Schedule L - Net Losses During Administration and Expenses Incurred in Administering Property Not Subject to Claims
21. Schedule M - Bequests, etc., to Surviving Spouse (Marital Deduction)
22. Schedule O - Charitable, Public, and Similar Gifts and Bequests
23. Schedule P - Credit for Foreign Death Taxes
24. Schedule Q - Credit for Tax on Prior Transfers
25. Schedules R and R-1 - Generation-Skipping Transfer Tax
26. Schedule U - Qualified Conservation Easement Exclusion
27. Schedule PC - Protective Claim for Refund
This may seem like a lot - but don’t worry. In general, not every schedule or part needs to be filled out. For example, if the deceased had no stocks or bonds, you wouldn’t need Schedule B. This will greatly simplify the process.
How do I fill out form 706?
It is highly suggested that you fill out form 706 with the professional assistance of a lawyer and an accountant. Form 706 can be quite complicated, especially if the estate is more than $10,000. If you would like to take a look, use PDFfiller to print the form and its instructions here. For further information, you can check out the following video:
When is form 706 due?
Form 706 must be filed within 9 months after the date of the death. If you are unable to file Form 706 during this time, you may request an extension with Form 4768. This will apply for an automatic 6-month extension.
Where do I send form 706?
When you have prepared all of the form and its relevant schedules, you can send them here:
Department of the Treasury
Internal Revenue Service Center
Cincinnati, OH 45999