IRS Instruction 706-NA – IRS Forms, Instructions, Pubs 2026 – In the complex world of U.S. estate taxation, nonresident aliens face unique challenges when dealing with assets located in the United States. IRS Form 706-NA, officially titled the United States Estate (and Generation-Skipping Transfer) Tax Return for the Estate of a Nonresident Not a Citizen of the United States, serves as the key document for computing and reporting estate taxes and generation-skipping transfer (GST) taxes. This form ensures that the IRS can assess taxes on U.S.-situated assets transferred upon the death of a non-U.S. citizen who is not a resident. As of 2026, with ongoing updates to tax policies, understanding the instructions for Form 706-NA is crucial for executors, tax professionals, and beneficiaries to avoid penalties and ensure compliance.
This article breaks down the essential aspects of IRS Instruction 706-NA, including who must file, filing requirements, valuation methods, deductions, credits, and recent changes. We’ll draw from the latest official IRS guidance to provide accurate, actionable insights for estate planning involving nonresident aliens.
What Is IRS Form 706-NA and Its Purpose?
Form 706-NA is designed specifically for estates of decedents who were neither U.S. citizens nor residents at the time of death. Its primary purpose is to calculate the estate tax imposed on the transfer of the decedent’s taxable estate located in the U.S., as well as any applicable GST tax. Unlike Form 706, which applies to U.S. citizens and residents, Form 706-NA focuses solely on U.S.-situated assets, ensuring that only property within U.S. jurisdiction is taxed.
The estate tax is based on the fair market value of these assets, reduced by allowable deductions and credits. Additionally, the form addresses GST taxes for transfers skipping generations, but only for U.S.-based property interests. Executors must use this form to report and pay any taxes due, promoting transparency and adherence to U.S. tax laws.
Who Must File Form 706-NA? Key Filing Thresholds
Not every nonresident alien estate requires filing Form 706-NA. The threshold is relatively low compared to domestic estates, making it important to evaluate carefully.
- Filing Requirement: The executor must file if the value of the decedent’s U.S.-situated assets at the date of death, plus the gift tax specific exemption (for gifts made between September 9, 1976, and December 31, 1976) and adjusted taxable gifts (after December 31, 1976), exceeds $60,000.
- U.S.-Situated Assets: These include real estate, tangible personal property physically located in the U.S., stocks in U.S. corporations, and certain debt obligations owed by U.S. persons or entities. Assets like foreign bank accounts or non-U.S. corporate stocks are generally excluded.
- Expatriates and Special Cases: If the decedent was a U.S. expatriate under section 877(b), a prorated share of U.S. property in foreign corporations (where ownership exceeds 10% and control over 50%) may be included. Treaties with countries like Canada or the U.K. may provide exemptions or alternative computations.
For 2026, the basic exclusion amount for U.S. citizens and residents is $15,000,000, but nonresident aliens are limited to a much smaller unified credit (typically $13,000, or more for U.S. territory citizens).
When and Where to File: Deadlines and Procedures?
Timely filing is critical to avoid penalties. Here’s what you need to know:
- Deadline: File Form 706-NA within 9 months after the decedent’s date of death. Extensions can be requested using Form 4768 for an automatic 6-month extension. A second extension may be available if the executor is outside the U.S., but a written explanation is required.
- Where to File: Mail to the Department of the Treasury, Internal Revenue Service Center, Kansas City, MO 64999. For private delivery services (PDS), use 333 W. Pershing, Kansas City, MO 64108.
- Payment Options: Taxes due must be paid within the 9-month period. Use electronic methods like EFTPS, wire transfers, or checks. Overpayments can be refunded via direct deposit by providing routing and account information on the form.
- Supplemental Filings: If changes are needed after initial filing, submit a supplemental Form 706-NA with explanations and a copy of the original.
Penalties for late filing or payment can reach up to 25% under Section 6651, unless reasonable cause is shown. Accuracy-related penalties (20% under Section 6662) apply for substantial valuation understatements.
How to Value Assets and Compute the Tax?
Valuation is a cornerstone of Form 706-NA. Assets are reported in Part V—Gross Estate in the United States.
- Valuation Date: Use the date of death or elect an alternate valuation date (6 months after death) if it reduces both the gross estate value and net tax due.
- Methods: Fair market value rules from Form 706 instructions apply. For stocks, include corporation name, shares, CUSIP number; for bonds, include obligor, maturity, interest rate, and CUSIP. Qualified conservation easements can exclude portions of land value via Schedule U from Form 706.
- Tax Computation (Part II): Use the Unified Rate Schedule from the corresponding Form 706 instructions to calculate tentative tax. Subtract credits like the unified credit ($13,000 max), pre-1977 gift tax credit (via Form 4808), and Canadian marital credit (if electing treaty benefits). Add GST tax from Schedules R/R-1 (Form 706) for U.S. property transfers.
| Key Component | Description | Maximum/Limits |
|---|---|---|
| Unified Credit | Basic allowance against tax | $13,000 (or formula for U.S. territories) |
| Gift Tax Credit | For pre-1977 gifts | Formula-based, attach Form 4808 |
| GST Tax | On skipping transfers | Limited to U.S. assets |
| State Death Tax Deduction | Proportional to U.S. estate | Attach certificate |
Deductions and Credits: Reducing Your Tax Liability
Form 706-NA allows several deductions in Part IV—Taxable Estate to lower the taxable amount.
- Deductions (Line 4): Include funeral expenses, administration costs, claims, unpaid mortgages, and losses during settlement (limited to U.S. gross estate value). Itemize on an attached schedule.
- Charitable Deduction (Line 7): For transfers to U.S. entities or U.S. use; attach Schedule O (Form 706).
- Marital Deduction (Line 7): Only if spouse is a U.S. citizen or property passes to a QDOT; attach Schedule M (Form 706).
- State Death Taxes (Line 8): Deduct proportional share; attach state certificate and notify IRS of refunds within 30 days.
Credits further reduce liability, as outlined in the computation section.
Required Attachments and Supporting Documents
To support your filing:
- Attach certified copies of the will, death certificate, appraisals, and U.S. gift tax returns (Form 709).
- For deductions/credits: Include Schedules from Form 706 and computations.
- Treaty Claims: Attach statements specifying the treaty and alternate calculations.
- Basis Reporting: File Form 8971 separately for beneficiary consistency.
All foreign documents need English translations.
Recent Updates to IRS Instruction 706-NA for 2025-2026
The IRS has implemented several changes to streamline processes:
- Form Redesign: Updated in September 2025 for efficiency, removing the representation authorization section—use Form 2848 or 8821 instead.
- Electronic Payments and Direct Deposit: Added fields for overpayment refunds; emphasis on transitioning from paper checks.
- Estate Tax Closing Letter (ETCL) Fee: Reduced to $56 effective May 21, 2025.
- Expatriate Rules: Final regulations under Section 2801 for gifts from covered expatriates.
These updates reflect broader IRS modernization efforts, including e-filing options for related forms like 709-NA.
Common Mistakes to Avoid When Filing Form 706-NA
Executors often encounter pitfalls that can lead to audits or penalties:
- Failing to attach required documents, such as wills or state tax certificates.
- Incorrect asset valuation or missing treaty statements.
- Late filings without extensions, or not notifying IRS of state tax refunds.
- Overclaiming credits without proper substantiation.
- Neglecting Form 8971 for basis reporting.
Consult a tax professional to navigate these issues, especially with international treaties involved.
Conclusion: Navigating Estate Taxes for Nonresident Aliens
Filing IRS Form 706-NA requires meticulous attention to detail, but understanding the instructions can simplify the process. By leveraging allowable deductions, credits, and treaty benefits, estates can minimize tax burdens. For the most current advice, always refer to the official IRS website or consult an expert, as tax laws evolve. If you’re handling a nonresident alien estate in 2026, start by reviewing the latest Form 706-NA PDF and ensuring all thresholds are met. Proper planning ensures compliance and peace of mind for all involved parties.