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Article Dean Dorton

Effective June 9, 2017, Revenue Procedure 2017-34 provides a simplified method whereby certain estates can obtain an extension of time to make an estate tax portability election. The simplified method is only available to estates that are not required to file an estate tax return based on the value of the gross assets in the estate.

History
Each individual is permitted a lifetime exemption (currently $5,490,000) from estate and gift taxes. At death, any unused exemption can be transferred to one’s surviving spouse to be added to the spouse’s own exemption. Simply put, this portability election allows a married couple to transfer nearly $11 million of assets without being subject to estate or gift taxes.

In addition to computing the amount of a decedent’s unused exemption available, the basic requirement for the portability election is that an estate tax return be filed within the time prescribed by law (including extensions). Estate tax returns are typically due nine months after the date of death and estates may obtain an automatic six-month extension. In order to elect portability, estate tax returns must be filed by estates that are not otherwise required to file based on the value of the gross assets in the estate.

Since December 31, 2014, the IRS has issued numerous letter rulings granting extensions of time to elect portability in situations where the decedent’s estate was not otherwise required to file an estate tax return. These requests have placed a significant burden on the IRS; therefore, the simplified method was created to ease this strain.

Requirements
In order for the simplified method to apply, the estate needs to meet the following requirements:

  • Decedent was a U.S. citizen or resident who died after December 31, 2010
  • The estate was not required to file an estate tax return based on the value of the gross estate
  • The estate did not file an estate tax return within the time prescribed

If these conditions are met, the estate will now have until either January 2, 2018 or two years from the decedent’s date of death (whichever occurs later) to file an estate tax return and elect portability.

If you have any questions, contact Faith Crump at fcrump@deandorton.com or Elizabeth Leatherman at eleatherman@deandorton.com.

Article Dean Dorton

In November, the Department of Labor (DOL) began sending emails to plan sponsors alerting them of the importance of obtaining a quality audit from a qualified and experienced CPA firm. The timing of the DOL communication is intended to coincide with the period when many plan audit contracts are renewed or out for proposal.

The Department of Labor letter refers to the recent DOL audit quality study which found deficiencies in nearly 40% of employee benefit plan audits (DOL study found at www.dol.gov/ebsa).  The DOL letter also states that employee benefit plan audits have unique audit and reporting requirements and are different from other financial audits, and that substandard audit work can be costly to plan administrators and sponsors.

According to the DOL study, CPA firms that were members of the AICPA Employee Benefit Plan Audit Quality Center tended to produce audits that have fewer audit deficiencies. Dean Dorton is a member of the AICPA Employee Benefit Plan Audit Quality Center and audits nearly 100 plans annually, including defined benefit, defined contribution and health and welfare plans. Over the past few years, several of the plans we audited were inspected by the DOL with no significant findings.

For more information, contact Jim Tencza, Director of Assurance Services, at jtencza@deandorton.com.


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