I just got back from an interesting lecture sponsored by the Mercer County Estate Planning Council. The keynote speaker was a representative from the New Jersey Department of Inheritance and Estate Taxation. Unfortunately I can’t remember his name, but he mentioned a few things that I thought were important enough to highlight and share.
It turns out that approximately 50% of all estate and inheritance returns that get filed are audited. They are especially aggressive in auditing returns in which the decedent owned a business, if there are valuation discounts claimed, if a compromise tax is made, or if the numbers just don’t add up. (Note: For more on the compromise tax, please see: Beware the compromise tax.)
The other noteworthy item the representative mentioned that they are more aggressively going after estates where no tax return is filed. They receive information about taxable estates from insurance companies who pay out death benefits and from the Surrogate when wills are probated.