New User Fee for Estate Tax Closing Letters
The new user fee—a $67 charge for providing a closing letter for an estate’s federal income tax return—goes into effect Oct. 28. The final regulations on the fee are laid out in TD 9957 in the Federal Register.
Previously, such closing letters were provided free of charge; however, federal agencies are required by law to charge a user fee in instances where certain public services provide special benefits to the recipient. Federal agencies have to reassess the fees every two years to see if they are, indeed, recovering the cost of the service.
Closing letters, showing information from the estate’s income tax return, can be helpful to the estate’s executor but aren’t required by law. The IRS concluded that issuing closing letters is one of those services that provides a special benefit—and it warrants a user fee.
In closing the door to free closing letters, though, the IRS opened a window to the estates.
The escape plan comes in the form of free account transcripts, which deliver information from the estate’s tax return similar to that in a closing letter. Transcripts are free from the IRS.
The final regulations in TD 9957 say that account transcripts can be used to confirm that an examination of the estate’s return has been completed and the IRS file has been closed – which would negate the need for a request for a closing letter.
For those who believe an IRS closing letter is still needed, the request can only be made through Pay.gov.
The IRS expects to provide more procedural details on the new user fee before it goes into effect Oct. 28.