Estate Tax Form M706 Instructions 2004 - FormSend

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General informationDeadline for payingThe Minnesota estate tax must be paid nolater than nine months after the date ofdeath of the decedent. However, it may bepossible to pay the tax in installments afterthis date if the estate meets the requirementsexplained in the section Paying tax in installmentson this page. (M.S. 289A.20, subd. 3)Extension of time to fileIf the Internal Revenue Service (IRS) grantsan extension of time to file the decedent’sfederal estate tax return, the federalextended filing due date automaticallyapplies to the Minnesota return. When youfile Form M706, attach a copy of the IRSdocument that grants the extension. Also, besure to indicate the approved federal filingextension due date on the front of yourMinnesota return.If you are not extending the time to file yourfederal return, you may request a six-monthextension for filing your Minnesota return.To request, you must send a letter explainingwhy the extension is needed and pay atleast 90 percent of the tax due. Mail yourrequest and payment to Minnesota EstateTax, Mail Station 5170, St. Paul, MN 55146-5170. You can assume your request has beenapproved if you do not hear from us within30 business days.The extension of time to file does not extendthe time in which you must pay the estatetax. To avoid penalties and interest, youmust pay your tax on or before the regulardue date (see Payment options above).If you made an extension payment, includethe amount you paid on line 12 of FormM706. (M.S. 289A.19, subd. 4)Extension payment. Estate tax is due bythe regular due date, even if the return willbe filed under an extension. A late paymentpenalty and interest will be assessed on taxpaid after the regular due date, unless youreceived an extension to pay the federal tax,or you have properly elected under IRCsection 6166 or 6601 to pay tax in installments.In which case, a penalty will not be assessed.Paying tax in installmentsIf the Minnesota estate tax is $5,000 or moreand the IRS has granted the estate anextension of time to pay the federal estatetax for the purpose of paying the tax ininstallments, the estate may pay theMinnesota estate tax in installments if therequirements explained below are met.(M.S. 289A.30, subd. 2)Payment optionsEstate tax can be paid electronically or by check.Pay electronically• Go to our website at www.taxes.state.mn.us.• If you don’t have Internet access, call 1-800-570-3329.Both options are free and there is no need to register. Enter the decedent’sSocial Security number and follow the prompts for individuals to make anestate tax payment. You’ll need the decedent’s last name, date of birth,date of death and your bank routing and account numbers.To be timely, you must complete your transaction and receive a confirmationnumber on or before the due date for that payment. You may also set uppayments—up to 13 months in advance—when you pay electronically.If you are making one of theyou must mail your checkfollowing payments by check:with a completed Form:Tax return payment (taxes due with M706) . . . . . . . . . . . . PV47Extension payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PV86Make your check payable to Minnesota Revenue.To be allowed to pay the Minnesota estatetax in installments, the executor mustnotify the commissioner in writing no laterthan nine months after the date of death ofthe decedent. The letter must indicate thatthe estate will pay the Minnesota estate taxin installments and the dates the paymentswill be made. The dates must be the sameas the dates on which the federal estate taxinstallments will be made.The installments on the total estate taxowed—not including interest owed—mustbe made in equal amounts.Even if you pay the tax in installments, youmust pay interest on any tax that remainsunpaid after nine months from the date ofdeath of the decedent. The rate of intereston each installment will be the interest ratein effect during that annual period. (M.S.289A.55, subd. 7)The amount of interest to include with eachinstallment must be figured separately.Follow the steps below to determine theinterest to include with each installment:1 Determine the number of days from thelast payment due date (return orinstallment) to date of payment orDecember 31, whichever is earlier.2 Divide step 1 by 366 (if 2004) or 365 (if2005), and round to five decimal places.3 Multiply step 2 by the interest rate in effectfor that year (see Interest on page 3).4 Multiply step 3 by the tax still due.• If the due date is in the same year thatyou’re making your payment, stophere. The result in step 4 is the interestyou must include with your installment.• If your payment was due in one year andyou’re making the installment in thenext calendar year, continue with step 5.5 Determine the number of days fromJanuary 1 to date of payment.6 Divide step 5 by 366 (if 2004) or 365 (if2005), and round to five decimal places.7 Multiply step 6 by the interest rate in effectfor that year (see Interest on page 3).8 Multiply step 7 by the tax still due.9 Add step 4 and step 8. This is the interestto include with your installment.If you fail to make an installment on time,you cannot continue to pay the tax ininstallments. Instead, you must pay —within 90 days from the date of the missedinstallment—the full amount of unpaidestate tax, a late payment penalty on theunpaid tax, plus interest.However, if you missed the installment datefor what you believe is a reasonable cause,write to the Commissioner of Revenueexplaining why the payment was late.You’ll be notified in writing whether youmay continue to pay Minnesota estate taxin installments. (M.S. 289A.30, subd. 2)2
General information (continued)PenaltiesLate payment. If you’re not paying estatetax in installments, a late payment penaltywill be assessed on any tax not paid by theregular due date—nine months after thedecedent’s date of death.The penalty is 6 percent of the unpaid tax. Ifyou file your return after the due date andyou do not pay the tax as reported on yourreturn, an additional 5 percent late paymentpenalty will be assessed on the unpaid tax.Late filing. If you file the return after theregular due date—or after the approvedextended due date—a late filing penaltywill be assessed on the unpaid tax.The penalty is 5 percent of the unpaid tax.An additional extended delinquencypenalty of 5 percent of the unpaid tax willbe assessed if the return is not filed within30 days after the department sends awritten demand.Failing to file with intent to evade taxor filing a false or fraudulent return. Apenalty of 50 percent of the tax due isadded to the tax. This penalty is in additionto any other penalties that may apply. (M.S.289A.60)Criminal penalties. If you willfully fail tofile a return in order to evade paying thetax, you could be charged with a grossmisdemeanor. If you file a fraudulentreturn in order to evade paying all or partof the tax, you could be charged with afelony. (M.S. 289A.63)Abatement of penaltiesIf circumstances beyond your controlprevented you from filing or paying yourtaxes on time, you may request an abatementof penalties. To request an abatement,send a letter to the department explainingthe specific events or circumstances thatprevented you from filing and/or paying ontime. Your abatement request must bemade within 60 days after the date youwere notified that a penalty has beenimposed. (M.S. 270.07, subd. 1)InterestInterest is calculated as simple interest andaccrues on unpaid tax and penaltiesbeginning nine months from the decedent’sdate of death. Interest will be charged evenif the deadline for filing the return has beenextended or the tax is being paid under aninstallment plan. The rate of interest maychange from year to year. (M.S. 270.75)The interest rate for 2004 and 2005 is 4percent. (M.S. 289A.55)Required informationInformation requested for filing estate tax isrequired under state law (M.S. 289A.10).You must attach the following to Form M706:• a completed copy of your federal Form706, including all federal schedules (Athrough U) that list an amount,• copies of the wills, property appraisals orsales documents, trust agreements,disclaimers, financial documents thatverify balances and/or stock or bondprices, etc., and• a copy of the death certificate.Other items you must attach to the returninclude:• a copy of the IRS’s extension approval, ifyou’re filing Form M706 by the federalextended due date, or a copy of thedepartment’s approval if your request fora Minnesota extension was granted.• an itemized list of the gross values of thedecedent’s real and tangible personalproperty located outside Minnesota (if aresident estate) or in Minnesota (if anonresident estate). Also, include a list ofthe schedule and item number where eachproperty is listed in the decedent’s federalreturn.• a completed PV47 payment voucher, ifyou’re paying the tax due by check withthe Form M706.• a copy of the IRS approval document, ifyou’re paying the federal estate tax ininstallments.Use one of the mailing labels provided onpage 4 to mail your Form M706 and allrequired attachments to the department. Ifyou choose not to use the label, mail yourforms to: Minnesota Estate Tax, MailStation 1315, St. Paul, MN 55146-1315.(M.S. 289A.10, subd. 2)Use of informationAll information you enter on the return isprivate under state law. It cannot be given toothers without your consent except to theIRS, other Minnesota state agencies andother state governments that are authorizedby law to receive the information and musttreat the information as private.The decedent’s Social Security number isrequired by M.S. 270.066. Although your—the executor’s—Social Security number isrequested on Form M706, you are notrequired to provide it. We ask for yourSocial Security number so the departmentcan correctly identify you, because you areresponsible for paying the estate tax if thetax is not paid from the estate’s assets.Reporting federal changesIf the IRS changes or audits the estate’sfederal tax or you amend the federal return,you must file an amended Minnesota estatetax return with the department. Theamended return is due no later than 180days after you are notified of the federalchanges or the date you filed the amendedfederal return.You must file an amended Minnesota returneven if the changes do not require you toamend the federal return. Complete a newForm M706 with the appropriate amendedinformation, and check the box at the top ofthe form to indicate that it is an amendedreturn. You must attach to your FormM706, a complete copy of the estate’samended federal return or the correctionnotice you received from the IRS.If there are no changes made to the federalreturn, the IRS will generally issue the estatean “Estate Tax Closing Letter.” If youreceived a closing letter, submit a copy tothe department so the estate’s file can beclosed. (M.S. 289A.38, subd. 7)If you fail to report the federal changeswithin 180 days as required, a 10 percentpenalty will be assessed on any additionaltax. (M.S. 289A.60, subd. 24)Refund of Minnesota taxIf you overpaid tax or the circumstances ofthe estate have changed since the Minnesotareturn was filed and you believe all or aportion of the tax already paid should berefunded, complete a new Form M706 andcheck the box to show it is an amendedreturn. Be sure to enter on line 12 any tax,penalty and interest you’ve already paid. Online 17 enter the refund amount.The estate will be paid interest on theamount refunded. (M.S. 289A.50)Income tax return forestatesIf the estate’s assets generate $600 or moreof Minnesota gross income, you must fileForm M2, Income Tax Return for Estates andTrusts, with the department.Form M2 corresponds to the federal Form1041, United States Income Tax Return forEstates and Trusts, and is due April 15 or the15th day of the fourth month following theend of the tax year.3
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Estate Tax Form M706 Instructions 2004 - FormSend

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