Lesson 14: Common Mistakes in Filing

Filing estate tax returns can be a complex process, and there are several common mistakes that can lead to complications, penalties, or even audits. Understanding these pitfalls is essential for ensuring accurate and compliant filings.

1. Missing the Filing Deadline

One of the most frequent errors is missing the deadline for filing Form 706. According to Lesson 13: Filing Deadlines and Extensions, the form is due nine months after the date of the decedent's death.

Form 706 is due nine months after the date of the decedent's death. Extensions may be available.

Always mark your calendar and set reminders to ensure you don't miss important deadlines.

Further Reading: For more insights on Federal Estate Tax Law, check out Federal Estate & Gift Taxes: Code & Regulations, Including Related Income Tax Provisions.

2. Incorrect Valuation of Assets

Accurate valuation is critical for determining estate tax liability. Common mistakes include overvaluing or undervaluing assets such as real estate, stocks, or personal property. Refer to Lesson 15: Fair Market Value Defined for guidelines on proper valuation.

Accurate valuation is critical for determining estate tax liability. Refer to valuation guidelines.

3. Neglecting Deductions

Failing to account for eligible deductions can lead to overpayment. Ensure you include all applicable deductions such as marital deduction, charitable deductions, and other deductions as explained in Lesson 8: Marital Deduction and Lesson 9: Charitable Deductions.

Include applicable deductions such as marital and charitable deductions to avoid overpayment.

4. Incomplete or Inaccurate Information

Ensure all information provided on Form 706 is complete and accurate. Incomplete or inaccurate information can trigger an audit. Double-check all entries before submission.

Double-check all entries on Form 706 to ensure completeness and accuracy.

5. Misunderstanding the Basic Exclusion Amount

The Basic Exclusion Amount is the portion of an estate that is exempt from estate tax. Misunderstanding this amount can lead to incorrect tax calculations. See Lesson 7: Basic Exclusion Amount for more information.

Understand the Basic Exclusion Amount to ensure correct tax calculations.

6. Not Electing Portability

Portability allows a surviving spouse to use any unused portion of the deceased spouse's exclusion amount. Failing to elect portability can result in higher estate taxes. Refer to Lesson 20: Understanding Portability for details.

Elect portability to use any unused portion of the deceased spouse's exclusion amount.

Diagram: Common Mistakes and Their Consequences

graph TD A["Missing Deadline"] --> B["Late Filing Penalties"] C["Incorrect Valuation"] --> D["Overpayment/Underpayment"] E["Neglecting Deductions"] --> F["Overpayment"] G["Incomplete Information"] --> H["Audit Risk"] I["Misunderstanding Exclusion"] --> J["Incorrect Tax"] K["Not Electing Portability"] --> L["Higher Taxes"]

Further Reading: For more insights on Federal Estate Tax Law, check out Federal Estate & Gift Taxes: Code & Regulations, Including Related Income Tax Provisions.

Conclusion

Avoiding these common mistakes can save time, money, and reduce the risk of an audit. Always double-check your work, understand the rules, and seek professional guidance if needed.

Further Reading: For more insights on Federal Estate Tax Law, check out Federal Estate & Gift Taxes: Code & Regulations, Including Related Income Tax Provisions.