IRS Instruction 706-A – IRS Forms, Instructions, Pubs 2026 – In the complex world of estate planning and taxation, IRS Form 706-A plays a crucial role for heirs dealing with specially valued property. This form, officially titled the United States Additional Estate Tax Return, is essential for reporting additional estate taxes under Internal Revenue Code section 2032A(c). Whether you’re a qualified heir navigating an early disposition of property or a cessation of qualified use, understanding the instructions for Form 706-A can help ensure compliance and avoid penalties. This article breaks down the key aspects of Form 706-A based on the latest IRS guidelines, updated as of September 2025.
What Is IRS Form 706-A and Its Purpose?
Form 706-A is used by qualified heirs to report the additional estate tax that may arise from the early disposition of specially valued property or the early cessation of its qualified use. Specially valued property typically includes farms or closely held business real estate that was elected for special-use valuation on the decedent’s Form 706, allowing valuation at its actual use rather than fair market value (FMV).
The purpose of this form is to recapture a portion of the estate tax savings that resulted from the special-use valuation. The recapture tax is limited to the savings attributable only to the specific property involved in the taxable event, not all inherited specially valued property. This ensures that the tax benefits are tied to the continued qualified use of the property for a specified period, promoting the preservation of family farms and businesses.
If you’re handling an estate involving section 2032A elections, Form 706-A helps calculate and report any additional taxes due, even in cases of involuntary conversions or exchanges that might otherwise be nontaxable.
Who Must File Form 706-A?
A qualified heir—defined as a family member of the decedent who inherits the specially valued property—must file Form 706-A for any taxable event related to that property. Family members include ancestors, spouses, lineal descendants (or their spouses), and legally adopted children.
Filing is required even if no additional tax is ultimately due. This includes scenarios like:
- Early disposition of the property.
- Cessation of qualified use.
- Involuntary conversions (e.g., eminent domain) or exchanges under sections 1031 or 1033.
If the property is disposed of to another family member, that transferee may become the new qualified heir if they agree to personal liability for future recapture taxes. In such cases, report on Schedule C of the form.
When and Where To File Form 706-A?
Filing Deadline
You must file Form 706-A and pay any taxes due within 6 months after the taxable disposition or cessation of qualified use. Extensions can be requested using Form 4768 by checking the “Form 706-A” box in Part II. If electing to increase the basis of the property (to FMV minus special-use value), interest must be paid from 9 months after the decedent’s death until the payment date.
There’s a two-year grace period after the decedent’s death during which no tax is imposed for not commencing qualified use, extending the 10-year recapture period accordingly.
Payment Options
Payments should be made electronically whenever possible, using services like EFTPS or IRS.gov/Payments. For balances due on Part II, line 19, options include same-day wire transfers or checks.
Where To File
Mail the form to:
- Department of the Treasury, Internal Revenue Service Center, Kansas City, MO 64999.
For private delivery services (PDS), use:
- Internal Revenue Submission Processing Center, 333 W. Pershing Rd., Kansas City, MO 64108.
If supplementing or amending a previously filed return, note “Supplemental Information” at the top and include supporting details.
Key Definitions and Taxable Events
Specially Valued Property
This refers to qualified real property (e.g., farms or business real estate) valued at its special use under section 2032A, including indirectly owned property through partnerships, corporations, or trusts. Heirs must have consented to personal liability on the original Form 706.
Taxable Events
A taxable event occurs if, within 10 years of the decedent’s death (or extended period), a qualified heir:
- Disposes of any interest in the property (e.g., sale, gift, or timber cutting under qualified woodlands election).
- Ceases qualified use, such as no longer using it for farming or business, or failing material participation requirements for more than 3 years in any 8-year period.
Special rules apply for retired or disabled decedents, and only one recapture tax is imposed per property portion.
Material Participation
This includes periods when the property was held by the estate. It requires active involvement by the decedent or heir (or family members) in the qualified use.
How To Complete Form 706-A: Step-by-Step Instructions?
File a separate form for each qualified heir. Start with Part I (general information), then complete applicable schedules (A for dispositions/cessations, B for involuntary conversions, C for family dispositions), followed by Part II (tax computation).
- Schedule A: List dispositions or cessations, including descriptions, dates, amounts realized, and special-use values from Form 706.
- Schedule B: For involuntary conversions or exchanges; report nontaxable events and attach details.
- Part II—Tax Computation: Recompute the estate tax using FMV, calculate the additional tax, and note any basis increase election.
- Schedule C: For dispositions to family members who agree to liability.
Sign under penalty of perjury, and if using a paid preparer, ensure they sign as well. Use Form 2848 for authorization if needed.
Valuations should match those on the original Form 706, adjusted for audits if applicable.
Penalties and Liens
Failure to comply can result in penalties for understatements: up to $5,000 or 75% of income derived for willful conduct under section 6694. A special lien under section 6324B applies to the property equal to the adjusted tax difference.
The statute of limitations for assessment is generally 3 years after IRS notification of the event.
Recent Updates to Form 706-A (2025 Revision)
The September 2025 revision includes a redesigned form for better efficiency, emphasis on electronic payments, and updated mailing instructions. As of early 2026, no further developments have been reported. Always check IRS.gov/Form706A for the latest information.
Conclusion
Navigating IRS Form 706-A requires careful attention to the instructions to avoid unnecessary taxes and penalties. By understanding the purpose, filing requirements, and completion process, qualified heirs can effectively manage additional estate tax obligations under section 2032A. For personalized advice, consult a tax professional or visit the official IRS resources for the most current guidance.