IRS Creates Further Time Extension For Portability Election- What It Means (And How It May Affect You)

Nothing can exacerbate a stressful situation more than being encumbered with the rules and statutes of the IRS. We have dealt with clients who have had to totally re-arrange their lives in order to conform to the taxation standards being thrown their way. At Accounting Solutions Ltd. we value our clients, and consider it our most important duty to provide those we care about with the most pertinent information regarding any changes to rules or regulations that may affect them. In order to do this, we carefully follow the taxation agencies to ensure that all of our accounting practices align with current policies, ultimately integrating our newfound knowledge within our previously established CPA and EA framework.
In reference to the aforementioned ‘stressful situation’, we are pleased to announce that the IRS has released a new clause that will assist taxpayers in some of the direst situations of them all… when a family member passes away. These new rules revolve around the time needed to make portability elections in the event of a spouse’s passing. ‘What is a portability election’, you may ask? Well, a portability election is a form of tax exemption that was first laid out in the American Taxpayer Relief Act of 2012. It essentially allows the surviving spouse to use their deceased counterpart’s unused estate tax exclusion. In 2017, the current exclusion amount is $5,490,000. This means that you could get as much as another $5,490,000 excluded from your estate taxes when you pass away. This exclusion amount is known as a deceased spousal unused exclusion amount, or DSUE, and was formerly required to be filled within a certain time period.
It is pretty hard to imagine the stress that one must go through following the death of their significant other, an array of negative emotions that are only accentuated through the need to arrange a tax exclusion. The IRS initially accounted for this by providing an extension of time for the portability election process. This simplified method was, however, only available on or before Dec 31, 2014. After this time, any late portability election would need to be submitted under Regs. Sec. 301.9100-3, which is an arduous process that has historically proven to be very costly for taxpayers. Although the IRS has granted a significant number of extension rulings since 2014, the steps required to achieve this are likely to infringe upon one’s finances.
Taking all of this into consideration, the IRS has just introduced Rev. Proc. 2017-34, a statement that provides a further extension of time to elect portability prior to the date of Jan 2, 2018, or the second anniversary of the decedent’s date of death. In the latter scenario, the taxpayer, or any successor for that matter, must seek relief by requesting a special letter ruling under Regs. Sec. 201.9100-3 and Rev. Proc. 2017-1, something which can be arranged with the help of a CPA.
Dealing with the death of a loved one is a sad reality that we all must face at some point, and it is a scenario that should involve as few bureaucratic nuances as possible. This new taxpayer-friendly development will make handling portability elections much easier than in the past, with fewer loopholes required for compensation should the posted date be missed. Accounting Solutions Ltd. has years of experience dealing with issues such as this, and are more than happy to assist those in need with any questions or concerns regarding this altered process. If you wish to learn more, then don’t hesitate to reach out via our website or telephone.
Chris Amundson