Tax form changes proposed by the AICPA

Florida residents who are serving as an executor under a testator’s will should be aware that the American Institute of Certified Public Accountants is pushing for changes to IRS draft form 8971, which discusses the rules governing beneficiaries who acquire property from a decedent. The AICPA also sent a letter to the IRS requesting more guidance on basis reporting that occurs between estates and beneficiaries.

Some of the recommended changes included in the first letter the AICPA sent regarding draft Form 8971 include clarification as to whether it is necessary to file Form 8971 if Form 706 has been filed for electing portability. Another proposed change is a set of instructions to clarify what an answer of ‘unknown” means and whether it makes the form incomplete. The AICPA also wants the IRS to ask on the form whether the estate tax value is being used for income tax purposes.

Recommendations in the other AICPA letter include requests for penalty relief in good faith efforts and clarification of time periods for required actions involved in filing the form. The AICPA would also like the IRS to treat trusts as beneficiaries and provide an exemption for small estates that do not have to file tax returns. The AICPA also requested general clarification for issues such as the absence of a beneficiary, provision for spouses and charities and penalty applications.

Federal estate tax is a complicated area of law, and executors may benefit from enlisting the services of a probate attorney after a testator has passed away. Attorneys can also help with the estate planning process and in some cases assist clients in the creation of documents that could minimize the tax burden to the beneficiaries.