In case you haven't heard, the IRS has released a new form, and it is due in just 7 days. June 30, 2016 is the filing deadline for the newest member of the expansive family of IRS forms, Form 8971.
So what is Form 8971, and why would you have to file it? The back story is this: the powers that be in Congress were feelings dissatisfied with the way beneficiaries reported their basis, and were perplexed by the inconsistencies these amounts these amounts had with the values reported on estate tax returns. The lack of reporting rules might have resulted in lost revenue (to the tune of roughly $1.542 billion, by their estimates), and they were not about to allow such an injustice to continue.
Their fix to the situation was to add a provision to the Surface Transportation and Veteran's Healthcare Choice Improvement Act of 2015 that requires beneficiaries to report their basis in the assets they inherit consistently with the corresponding filed Form 706.
The end result is that (if no exception applies) we have another form to file in connection with the assets reported on Form 706. To put it simply, one month after the filing of Form 706, Form 8971 must be filed and Schedule A of the form must be provided to the beneficiaries. Because the filing for this form has been delayed by legislation three times now, all Forms 706 filed between July 30, 2015 - May 31, 2016 are required to be accompanied by Forms 8971, filed June 30, 2016.
Don't let the apparent simplicity of the two page form fool you, though. There are quite a few complex nuances that accompany the new basis reporting rules, and failure to complete and file this form timely and accurately could result in penalties of up to $3.193 million per year!!! To avoid these devastating penalties, give our tax advisors or estate planners a call and let them guide you through the filing.