The federal estate return and the payment of any estate tax are both due nine months after the date of a decedent’s death. A six month extension of time to file the estate tax return can be obtained by filing Form 4768 by the original nine month due date. While that will extend the due date to file the return, it does not by itself extend the due date to pay the tax.
Internal Revenue Code Section 6161 (hereafter “IRC”) provides that the IRS may grant a discretionary extension of time to pay the estate tax of up to 12 months. Form 4768 is also used to apply for this extension of time to pay the estate tax. Part III of the form is completed to make this request and a statement must be attached explaining why an extension of time to pay is needed. The form contains a box where the extended due date requested must be noted.
In Ronald B. Baccei, Trustee of the Eda O. Pucci 2004 Revocable Trust v. U.S., (9th Cir. February 16, 2011), the executor’s accountant prepared and filed Form 4768, where he completed Part II, requesting an extension of time to file the estate tax return, but did not complete Part III to request an extension of time to pay the tax. The transmittal letter which accompanied the filing of the Form 4768 did make clear that an extension of time to pay the tax was being requested and gave the reasons therefor.
When the return was filed, the IRS assessed a penalty for late payment of the estate tax. When the case reached the Ninth Circuit, the court affirmed the prior holding of the district court that the IRS was correct: no extension of time to pay the tax had been obtained. The Ninth Circuit considered and rejected three separate arguments raised by the executor. The first was that the executor “substantially complied” with the requirements to obtain an extension of time to pay the tax. The court said there is no substantial compliance doctrine that is applicable in this instance. The executor then argued that the IRS had a duty to provide notice to the executor that the application was defective and allow the executor time to correct it. The court found no such obligation on the part of the IRS. Finally, the executor argued that the late payment of the tax was due to “reasonable cause.” The court found that relying on the accountant to apply for the extension of time to pay was not reasonable cause for the late payment.
The IRS routinely grants payment extensions of up to one year. However, as this case shows, you must properly complete the Form 4768 and have a good reason for requesting the extension.