Avoiding Gift and Estate Audit Triggers: Anticipating Audit Issues, IDRs, and Appeals

An estate or gift tax audit is different from an income tax audit. Anticipating these unique issues and knowing how to handle a 706 or 709 audit is critical to avoid additional estate or gift tax liability or a reduction in a taxpayer's unified credit. Moreover, properly prepared gift tax returns set the stage for later estate tax savings on death.

Finding out that an estate is officially closed and not subject to audit allows the preparer, executor, and beneficiaries to breathe sighs of relief. Advisers and executors can take on every gift and estate return to mitigate the chance of audit and better prepare a return with sticky issues for audit. A thorough internal review can avoid many audit triggers. Missing documentation, vague descriptions, and discrepancies between the will and the 706 can be corrected before the return is submitted. Other triggers, valuation, minority and marketability discounts for closely held businesses, reporting of adjusted taxable gifts, and special elections require more consideration before reporting.

At the onset of an audit, the practitioner must respond to the IDR (Information Document Request). IRC Section 7491 allows the shifting of the burden of proof to the IRS for taxpayers meeting its requirements. These requirements include cooperating with the IRS and its IDRs, which can sometimes be impractical. Often the next consideration is whether to allow an extension of the statute--what do you give up, and when is this in the taxpayer's best interest? When the taxpayer and IRS disagree, the taxpayer can initiate an appeals conference. When is an appeals conference advisable, and what are the odds of coming ahead in appeals?

Listen as our expert conveys first-hand knowledge of IRS audits of estate and gift tax returns, including issues to expect during 706 and 709 examinations, how to reduce the likelihood of being selected, and how the IRS audit process works.

I. Issues to expect

II. Avoiding audit triggers

III. Protecting the burden of proof

IV. Extending the statute

V. The appeals process

VI. The current state of the IRS initiative

The panel will review these and other key issues:

• How to lessen the chances of being selected for a gift or estate return audit
• Selection of appraisers and communication for the most effective valuation reports
• Complying with the all-important adequate disclosure requirements with gift tax returns
• Internal steps to prepare for 706 and 709 audits
• When to permit the extension of the statute of limitations with gift tax audits
• Hot issues that trigger estate and gift tax audits
• How to best communicate with the IRS

Learning Objectives

After completing this course, you will be able to:

• Identify internal practices that will lessen the likelihood of audit selection
• Recognize top IRS audit issues on estate and gift returns
• Discern when to agree to extend the statute of limitations
• Determine when IRS findings warrant an appeal

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

  Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of estate, gift and trust taxation including various trusts types, the unified credit, and portability.

  
  

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).