Extension of Time to Pay Federal Estate Tax

Yes. The IRS may grant an extension to pay for a period of one year past the due date when reasonable cause exists. A 10-year extension to pay is discretionary. You apply for an extension to pay by filing Form 4768, Part III, and attaching it to your estate tax return Form 706. The extension of time to pay is only for the amount of the cash shortage. The reason for extension must be attached.

Examples of reasonable cause for not paying the estate tax on time include:

(1) the estate’s liquid assets are located in several jurisdictions and not immediately subject to the executor’s control;

(2) a substantial portion of the estate’s assets consist of rights to receive payments in the future (e.g., annuities, copyright royalties, accounts receivable);

(3) an estate includes a claim to substantial assets that cannot be collected without a lawsuit; and

(4) the estate would be forced to borrow at a higher interest rate than generally available to (1) pay the taxes, (2) provide a reasonable allowance during the administration period for the decedent’s surviving spouse and dependent children, and (3) satisfy the claims against the estate that are due.

If an extension is granted, interest is charged from the regular due date to the date of payment.