Estate and Gift Tax Audits

The Maryland Bar Bulletin recently published an article that describes the estate and gift tax auditing process in detail. The article also lists several common audit issues to watch out for, including: 

• Failure to answer all questions on the return or to attach all required documents to the return
• Not attaching an appraisal when applying valuation discounts
• Reporting jointly owned property erroneously
• Excluding/undervaluing personal property
• Errors on technical tax issues
• Fractional interests in property
• Math errors
• Sloppy returns

If you receive an audit letter, it is of utmost importance to be responsive, even if you prepared your returns carefully. In some cases, an explanation will solve any issues. It is also important to be respectful when dealing with the auditor, so that future interactions will be cooperative. 

See Jennifer A. Pratt, Overview of Estate and Gift Tax Audits, Maryland Bar Bulletin, Sept. 2011; William Alan Nelson II, Tax and estate Gift Audit, Wealth Strategies Journal, Sept. 21, 2011. 

Special thanks to Jim HIllhouse (WealthCounsel) for bringing this article to my attention.