The Return is Due When?

The moment a nonresident, non-US citizen passes away with US property in his possession, the US estate tax clock starts to tick away the minutes to when the return is due.  The Internal Revenue Service requires a foreign estate that owns US property to file an estate tax return within 9 months after the date of death.  For example, Sam is a citizen of Country X. Though neither a citizen nor a resident, he acquired property within the US.  He mentioned the property periodically to friends and family, but no one ever thought much about it.  Then, unexpectedly, Sam dies on 30 March 2011.  The clock begins to run to the due date on his estate tax return 1 April 2011, and ends 31 December 2011.

On 20 December 2011, as you are going through Sam’s papers and preparing his Country X estate tax return, you discover information about Sam’s US property.  If the panic starts to set in take a deep breath.  You can apply for an automatic 6 months extension.[1]  The Internal Revenue Service allows an estate to file an extension and receive an additional 6 months of time to send an estate tax return, as long asit receives  the extension on or before the due date of the return.[2]  The return is now due 30 June 2012.    If you fail to file the return by the due date, the Internal Revenue Service will access penalties and interest on the estate, if tax is owed.

As 30 June 2012 approaches and you are still trying to gather all the information on the US property, an executor who is out of the country can request an additional extension of time to file the return.[3]  However, if the estate has already filed the automatic 6-month extension, and needs to apply for an additional extension, it should submit the extension request early enough to the Internal Revenue Service so that it can consider the application.

But what happens if  2 January 2012 rolls around, and you’ve failed to file the application for an automatic 6 month extension?  The Internal Revenue Service requests that you file the application as soon as possible and show good and sufficient cause for failing to file the automatic extension.[4]  In its discretion, it may grant an extension of time.[5]  Please note, an extension of time to file does not grant an estate an extension of time to pay any tax due.[6]  We will discuss this issue in a later post.

So, what if you filed an extension, but the estate was not required to file a US estate tax return? Unless you want the IRS as an international pen pal, I suggest  your executor  send a letter stating that no return is required for the estate.[7]