IRS Workforce Reductions Could Impact Estate Planning – What You Need to Know

The Internal Revenue Service (IRS) is facing significant workforce reductions as part of the initiative to downsize the federal government.  Looming IRS workforce reductions may also have implications for estate planning, particularly in areas such as estate tax processing, audits, and the administration of trusts.  However, proper planning can help mitigate potential effects on your estate and ensure a smoother transfer of wealth to your loved ones.

Implications

• Delays in Estate Tax Return Processing: This is happening at a time when the federal exemption may be reduced due to sunsetting.  If so, more people may need to file an estate tax return with fewer IRS employees which could potentially slow down processing times and delay estate settlements.  
• Increased Risk of Errors or Audits – Fewer experienced IRS agents may be available to review complex estate tax filings. This could lead to disputes, requiring executors and beneficiaries to invest more time and resources in resolving tax issues.
• Slower processing of tax returns also means slower processing of returns for trusts, which may affect the timing of distributions.

To minimize the effects of any IRS staff reductions on your estate plan, there are a few things you can do, including the following:

• File returns promptly to help avoid delays. 
• Ensure accurate record-keeping to reduce the risk of audits or disputes.
• Consult an estate planning attorney, tax advisor, or certified public accountant to help you navigate potential IRS processing slowdowns.
• It is beneficial to work with an experienced estate planning attorney near you so that you can set the best course for financial stability and leave the best legacy possible. Consulting with an estate planner also helps ensure that you are executing the estate planning documents that are most suitable for your unique situation. Your estate plan should likely include a will, trust, health care and financial powers of attorney, and other key legal documents.
• Consider proactive tax strategies, such as gifting assets during your lifetime, to reduce estate tax exposure.
• It is always important to plan ahead, and it is as important as ever during times of uncertainty.