IRS Simplifies Extend Time for Tax Exclusion

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Extend Time for Tax Exclusion Updated

The Internal Revenue Service has posted a revenue procedure to give widows and widowers the ability to file for an extension of time on a tax exclusion beyond the fifth anniversary of their spouse’s death.

Revenue Procedure 2022-32, released Friday by the IRS, provides a simplified method for certain estates to obtain an extension of time under Section 301.9100-3 of the Tax Code to file a return on or before the fifth anniversary of the decedent’s death to elect portability of the deceased spousal unused exclusion (DSUE) amount.

The revenue procedure applies to estates that aren’t normally required to file an estate tax return because the value of the gross estate and adjusted taxable gifts is under the filing threshold in Section 6018(a).

The procedure supersedes an earlier revenue procedure from 2017, Rev. Proc. 2017-34 and gives taxpayers a simpler method to get an extension of time to make a “portability” election under Section 2010(c)(5)(A) of the Tax Code. The portability election enables a decedent’s unused exclusion amount to become available for application to the surviving spouse’s subsequent transfers during life or at death.

Taxpayers can use the simplified method instead of going through the letter ruling process. No user fee is needed for submissions filed under the new procedure.

Who is eligible for tax exclusion?

To be eligible to use the simplified method, the decedent must have been a citizen or resident of the United States on the date of death and the executor must not have been otherwise required to file an estate tax return under Sec. 6018(a), as determined based on the value of the gross estate and any adjusted taxable gifts. The executor also must not have timely filed the estate tax return within nine months after the decedent’s date of death or extended filing deadline.

If it is later determined that the estate was required to file a return, the grant of relief will be deemed null and void, the IRS stated. Also, this relief does not extend the period during which the surviving spouse may claim a credit or refund of overpaid gift or estate tax on the surviving spouse’s own gift or estate return.

The revenue procedure also provides guidance on filing a protective claim for credit or refund by the surviving spouse or his or her estate before a portability election by the deceased spouse’s executor has been made, with three examples.