Tax Controversy and Tax Compliance Partner Yvonne R. Cort will be speaking at the Divorce Directions Summit, a live, free, virtual event Monday, August 14th – Tuesday, August 15th from 10 AM – 2 PM ET. Interested attorneys, accountants, realtors, or other professionals serving clients in the divorce/matrimonial sector are especially invited to attend Yvonne’s Monday, August 14th presentation on Innocent Spouse & Divorce, scheduled at 10:15 AM. To register for this educational summit, please click https://bit.ly/DivorceDirectionsRSVP.

Webinar Recap

Your Recap of Our Estate Planning for Your Disabled Child: The ABCs of SNTs Webinar

Stuart H. Schoenfeld recently hosted a compelling webinar on “Estate Planning for Your Disabled Child: The ABCs of SNTs.” If you were unable to attend or simply wish to revisit the topics discussed, we’ve provided a link below to watch the full webinar and keep slides on hand when you need to refer back to them.

View Webinar Recording

View Slides

Feel free to share this link with others who may find the information useful. Please don’t hesitate to reach out if you have further questions or need additional assistance. The Capell Barnett Matalon & Schoenfeld team is always ready to help guide you through these complex legal matters.

Capell Barnett Matalon & Schoenfeld LLP is pleased to announce that our Partner Stuart H. Schoenfeld has been named one of Long Island Herald’s 2023 Top Lawyers.

“The Long Island Herald Top Lawyers Award is further acknowledgement of Stuart’s commitment to each client he serves as a Partner in our Elder Law, Medicaid, Special Needs, and Trusts & Estate practices,” says Managing Partner Renato Matos.“He is a proactive advocate on each of their behalfs to  help them achieve their individual goals and safeguard their legacies for future generations.”

A valued colleague, Stuart is an integral member of Capell Barnett Matalon & Schoenfeld’s team of dedicated attorneys and staff committed to delivering comprehensive and cost-effective legal services tailored to each client’s unique challenges, goals, and values.

 

About the Attorney

 

Join Capell Barnett Matalon & Schoenfeld Partners Robert S. Barnett, Esq,, Masters (Taxation), CPA; Gregory L. Matalon, Esq.; and Erik Olson, Esq. for their presentations at the First Annual Tax Symposium hosted by the Chinese American Society of CPAs discussing gift tax reporting, trust and estate taxation, and partnership/S corp-related taxation. Eight CPE credits are available for the full day.

WHAT: The Chinese American Society of CPAs Tax Symposium
WHEN: Wednesday, June 21, 2023
WHERE: Hyatt Place Flushing/LGA, 133-42 39th Ave., Flushing, NY 11354
TIME: 8:15 AM – 5:45 PM l Our partners will present from 11 AM – 1 PM
COST: $100 (For Capell Barnett Matalon & Schoenfeld guests)
CREDITS AVAILABLE: 8 CPE

Register Now

 

Meet the Attorneys

 

Partner Jodi Warren Is Honored for Her Work on Behalf of Not-for-Profit and Religious Organizations to Further Their Missions Through Mission Driven Development^TM

NEW YORK, NY – Capell Barnett Matalon & Schoenfeld LLP is pleased to announce that our Partner Jodi Warren has been awarded New York Nonprofit Media’s first-ever Nonprofit Trailblazers Award in recognition of her work on behalf of not-for-profit and religious organization clients.

“Award winners are selected based on their dedication to making a positive impact on New York City and State,” says Capell Barnett Matalon & Schoenfeld Managing Partner Renato Matos. “Jodi’s work in our Not-for-Profit and Religious Organizations Law Practice fully embodies that credo. This award is a credit to her drive and her determination to help clients further their missions through the implementation of our Mission Driven Development process.”

 

Meet Our Partner

Jodi Warren routinely represents religious and not-for-profit organizations on complex real estate transactions, including long-term leases, purchase and sale of properties, joint ventures, and development projects. She serves as counsel to numerous denominational governing bodies, individual congregations, and nonprofit organizations. Jodi represents and advises clients in all aspects of the development, construction, finance, acquisition, and divestiture of assets.

by Max Freedman, Business News Daily Contributing Writer
Featuring Yvonne R. Cort, Partner

Could the IRS’ new $79.6 billion in funding result in more small and midsize business audits? Experts discuss whether or not this concern is founded.

• Most tax experts agree that more SMB tax audits could be coming, but opinions differ about whether this increase in audit frequency will be meaningful.
• Payroll, tax and accounting software can all help you remain tax-compliant, and so can staying organized and honest. Separating your business and personal finances is important too.
• If you’re audited, read your audit letter thoroughly first. It’s also crucial to hire a tax professional and cooperate with IRS agents.
• This article is for SMB owners concerned about the potential for more frequent tax audits.

You might assume that a bill with a name like “Inflation Reduction Act” would only bring relief to the small business community, especially in a midterm election year. However, when the bill was signed into law, one provision had many small and midsize businesses (SMBs) worrying – and not about inflation. Some are concerned that the bill’s new round of IRS funding could lead to more SMB tax audits.

Is the notion of increased SMB tax audits founded or unfounded? And if it is founded, what can small businesses do to stay compliant and meet tax obligations? How should they handle an audit if they are subject to one? Below is an in-depth exploration of all these questions, with input from tax experts.

How did the Inflation Reduction Act affect IRS funding?

The Inflation Reduction Act, which went into effect on August 16, 2022, will funnel $79.6 billion into the IRS over the next decade. This is a significant cash infusion for the IRS, as the agency has often had its budget slashed over the past decade. The IRS has also experienced high employee turnover, with 23,000 employees leaving its employ since 2010.

According to Sarah York, an accountant with Keeper Tax and an enrolled agent with the IRS, the cash infusion is much needed. The hope is that this new cash infusion reverses the trend of budget cuts and brings stability to the agency.

“It’s revamping their phone systems, improving their computer systems, and hiring new and younger staff to kind of manage the problem,” York said of the new funding’s potential effects. “Right now, what most CPAs have been dealing with, especially in the last three years, is the staffing shortage at the IRS.”

Why would new IRS funding lead to more SMB tax audits?

The notion that extra IRS funding could make SMB tax audits more common stems from the agency’s recent history. Many of the employees who have left the agency are highly experienced auditors, leaving behind a staff less able to handle complex audits. Typically, the higher an entity’s income, the more complicated their audit will be. That means a thinned-out IRS could primarily target lower-income entities, including SMBs.

“You’ll hear people say [the IRS is] just auditing poor people,” said Eric Green, a tax attorney and partner with Green & Sklarz. “There’s a little truth to that because those folks are easier to audit through correspondence and office audits. But I don’t think any [IRS] commissioner … ever sat around and said, ‘let’s go after poor people.’”

Data from Syracuse University backs the notion that lower-income earners are audited more often. According to this data, in tax year 2021, the IRS audited 13 out of every 1,000 taxpayers with low annual revenue. The corresponding rate for all other taxpayers was 2.6 out of 1,000, meaning low-income taxpayers experienced five times as many audits.

Key takeaway: When the IRS lacks funding and employees, it may also lack the resources to conduct anything other than low-income taxpayer audits.

Do SMBs really have to worry about more tax audits?

The tax experts we spoke with said that the annual amount of SMB audits will likely increase in future years. However, these experts gave varying answers on the potential extent of this increase. We’ve broken down their opinions below.

Opinion 1: Yes, SMBs may need to worry about more audits.

According to Yvonne Cort, a tax attorney and partner at Capell Barnett Matalon & Schoenfeld LLP, the increase in SMB tax audits is already here.

“I’m already seeing an uptick in audits,” Cort said. “It’s there, they started, the letters are going out, and people are being audited.” Cort said that the IRS is auditing SMB owners to close the “tax gap,” which comprises “people who have not been paying, either through not filing [a return, or] they didn’t put down the right amount of tax owed.”

Keith Jones, a CPA who operates under the name TheCPATaxProblemSolver, agrees. “There’s probably going to be more audits and less help to taxpayers,” Jones said. He added that the new funding would likely go toward “revenue-generating spots and not customer service spots. The revenue generated would be [through] auditors.”

Logan Allec, a CPA and owner of tax relief company Choice Tax Relief, said he firmly believes that more SMB audits will result from the new funding since much of it is directed toward the IRS’s “civil enforcement” division.

“$45.6 billion, is going towards civil enforcement,” Allec said. Civil enforcement, he added, encompasses “auditing and collecting taxes from certain groups that the IRS believes contributes to the tax gap,” including SMB owners.

Opinion 2: More audits will occur, but not to a meaningful extent.

Green told Business News Daily that concerns about a surge in SMB tax audits may be overstated, though a slight uptick should be expected.

“Do I think that the [new funding] will lead to more audits? Yes,” Green said. “Do I think that they’re gonna have 87,000 auditors breaking people’s doors down, grabbing stuff? No. That’s nonsense. The audit rate now is 1.3% … The percentage will go up, but not meaningfully.”

York agreed with Green’s assessment, adding that U.S. secretary of the treasury Janet Yellen has directed the IRS not to disproportionately target those with incomes of under $400,000. Still, York expects improved IRS operations will result in slightly more audits than years past.

“We shouldn’t see that big of a shift in the current audit rates for small business owners,” York said. “With the influx of resources, and as [the IRS] modernizes their computer systems, we could see more audits just because the technology is going to be more precise at picking up errors,” she said.

Andrew Griffith, proprietor of Andrew Griffith CPA, shared similar views. “I think much of this speculation is unfounded and unfortunate,” Griffith said. However, Griffith also said he “would not be surprised” if more audits did happen, “because that is part of … enforcing compliance with the tax code, and also [improving] the IRS’ own system issues.”

Tip: Even tax experts who think that SMB tax audit worries are exaggerated say that audits will indeed become more frequent. These experts believe the increase will be small, if not unnoticeable, but opinions vary. Other experts think the increase will be significant.

The tax experts we spoke with gave the following advice for keeping SMB taxes compliant to minimize audit risks.

1. Use the right software.
Whether you have employees or you only pay yourself from your business’s earnings, payroll software can help you remain compliant with tax regulations. The best payroll software platforms are regularly updated to reflect regulatory changes, which inherently keeps your business compliant. So too are many of the best accounting software platforms, which represent another type of technology that’s key to remaining compliant.

Did you know?: Some payroll services, such as Gusto, come with added HR services to further assist you with compliance. Read our Gusto payroll review to learn more.

You may want to consider using tax software alongside your payroll service. The best tax software, though not always superior to hiring an accountant depending on your business needs, can automate your tax filing process and streamline your compliance. TurboTax might be the first name that comes to mind when thinking about this software – and it’s our top tax software pick overall. Read our TurboTax review to find out why.

2. Keep your paperwork organized and substantiate your expenses.

Green said that organized paperwork is key to tax compliance, so pay attention to your recordkeeping practices.

“When you’re doing your tax return, all your documentation should be in one place,” Green said. “You set the groundwork [for a successful audit] when you get everything together for the return and keep it in one place.”

Green also said that when SMB owners get audited, it usually occurs long after filing their taxes. An audit can occur up to 18 months later, he said, so preemptively getting organized is always a smart move.

“Keep good records,” Cort said, adding that any paperwork for tax deductions should include justification for the expense. “I see a lot of people who don’t have adequate substantiation, especially for things like office supplies [or] stuff they’re buying [that] could just as easily be used at home as at the office.”

SMB owners should keep notes about their expenses, she added. For example, if you’re writing off a lunch meeting, it’s important to note who you’ve met with and what you discussed, so you can make it clear to the IRS why the lunch was indeed a business expense.

Griffith had similar advice. “[If] transactions are properly disclosed on the appropriate tax returns, that taxpayer has no real concerns about being audited.”

3. Separate your business and personal finances.

Here’s a piece of advice most SMB owners have probably heard before and could always stand to hear again: Open separate personal and business bank accounts.

“Don’t co-mingle your personal funds with your company funds,” Jones said. “You want two separate checking accounts. I’ve seen it so many times: [SMB owners] run everything through a personal account, so they have business and personal expenses coming from the same account. That’s a recipe for disaster.”

Allec gave similar advice. “If you give the IRS … all [your] bank statements and it’s a mix of personal bank statements that you ran your business through … it shows disorganization.”
That can make your audit more difficult, he said. Separating business and personal finances can solve this problem.

How to handle an audit

Below are some steps that can make a business tax audit more bearable.

1. Go over your audit letter with a fine-toothed comb.

If the IRS decides to audit you, it will send you a letter via USPS. You should open this letter immediately and read it closely. You should also note that the IRS will only send you an audit letter via USPS – other communications may be coming from scammers. As you read your audit letter, note everything that the IRS is asking you to provide.

“Usually, you’ll get something called an information document request,” Allec said. “That’ll tell you what the IRS is looking at.” Allec recommended reading this letter thoroughly, then sending the IRS all those records at once.

“If you make the auditor’s life easy, hopefully they’ll just move on to the next file,” he said. But it doesn’t always go that smoothly.

2. Hire a professional.

Most experts we spoke with stressed the importance of hiring a certified public accountant (CPA) to represent you during an audit. This makes sense: Tax audits are obviously anxiety-inducing, and it’s easy to make poor decisions under this mountain of stress. Tax professionals, on the other hand, deal with audits all the time, so they know how to approach audits rationally. They can – and should – be present with you and speak on your behalf in all audit affairs.

“You want to have professional representation,” Green said. “Do not try to handle this yourself.”

Jones agreed: “When you get audit letters, contact somebody and get representation.”

“When you get [an IRS] notice, that’s a good time to involve a tax professional,” York said.

However, York acknowledged that for some SMB owners, this may not be possible. In that case, she said, “Have your bank statements ready and recognize that, IRS auditors, they’re people and they want to help you. They want to make sure that you’re claiming what you’re allowed to claim. They’re gonna go in and look for things. If you work with them, they’ll work with you.”

3. Cooperate with auditors while being careful with their questions.

Remain professional when interacting with the IRS. No matter how frustrated you feel about being audited, any negativity can cause the IRS to think you’re hiding something. You’re better off being as kind and level-headed as possible, even if you’re upset on the inside. Keeping your cool might not feel great in the moment, but your kindness could bring your audit to a close sooner than later.

“People tend to be surprised at how understanding IRS auditors typically are when they go in and examine records,” York said. “They know small business owners don’t have the same accounting systems in place as big corporations. They’re willing to give grace and allowance for things if you approach it with the attitude, ‘We want to work with you.’”

That said, you should only answer auditor questions with the exact information the auditor is seeking. Anything more you say could open new doors for the IRS to pursue you through and add to your troubles. Green gave an insightful example.

“I have a taxpayer that shut down their consulting practice,” Green said. “The auditor noticed that, for the last two years, they had no income. The client said, ‘I wasn’t working at it.’ What the auditor heard is, ‘You’re not working at it, so it’s a hobby. You don’t get the deductions.’”

The auditor thus disallowed all the deductions.

“What a professional would’ve said is, ‘The taxpayer had ceased operations and was in their wind-down period, pursuant to regulations,’” Green said.

Green said he took this case to appeals and reversed the auditor’s elimination of the client’s deductions. This is just one of many examples where a tax professional can more expertly navigate an audit than a non-expert SMB owner.

Key takeaway: Reviewing your audit letter, working with a tax professional, and cooperating with auditors can make a tax audit less stressful.

More SMB audits might be coming, but you can be prepared

An increase in SMB audits doesn’t necessarily spell doom for your company. If you do get audited, sometimes simply sending the requested documentation to the IRS with professional help can quickly solve the problem. If the audit does continue thereafter, the advice in this article should help you come out on the other side unscathed.

Max Freedman is a content writer who has written hundreds of articles about small business strategy and operations, with a focus on finance and HR topics. He’s also published articles on payroll, small business funding, and content marketing. In addition to covering these business fundamentals, Max also writes about improving company culture, optimizing business social media pages, and choosing appropriate organizational structures for small businesses.

We are pleased to share recordings of the sessions so you can review and revisit the information shared during the Conference at your convenience.

Please click on any of the bullets below to access a presentation. If you have further questions or the matters discussed, please contact us at pr@cbmslaw.com at any time.

Presentations:

• Welcome / Introduction – Mission Driven Development™: What Have We Learned? Where Do We Go?
• Updates from the Office of the Attorney General
• Post-Covid Challenges and Opportunities: Judicatory Panel
• Succession & Legacy Planning
• Practical Legal Tips to Running Your (Religious) Corporation
• Re-imagining Ministry, Re-engaging Communities
• Accounting for Religious Corporations

PowerPoints:

• Updates from the Office of the Attorney General
• Re-imagining Ministry, Re-engaging Communities
• Succession & Legacy Planning
• Accounting for Religious Corporations

Building on the previous expansion granting Not-For-Profits and Religious Corporations permanent permission to hold meetings virtually, the NY Not-For-Profit Modernization Act further expands electronic participation in corporate meetings and aligns the law with the common practices of the Not-For-Profit and religious sector with specific changes to N-PCL Sections 614, 705, and 708. These changes are effective as of November 21, 2022.

 

Other Electronic Means (N-PCL Sections 614 and 708)

Under the N-PCL and unless prohibited by an entity’s corporate documents, any action which may be undertaken by a vote of the members [congregation] or the board of directors may be conducted without a meeting if all directors or members agree in writing. Prior to the NY Not-For-Profit Modernization Act, such consent needed to be either in writing or by means of electronic mail (e.g., by sending an email where in the body of the email consent to the action is provided).  The NY Not-For-Profit Modernization Act expands the methods beyond just electronical mail to “electronic mail and other electronic means,” which permits members and board members to vote using poll tools or text message, so long as the consent can reasonably be determined as authorized by the individual.

Terms of Replacement Directors (N-PCL Section 705)

The NY Not-For-Profit Modernization Act also changed how a vacant director position may be filled with a replacement director. N-PCL Section 705 previously limited the replacement director’s term to the next annual meeting of the corporation. Replacement directors may now serve the full remaining term of the directorship which they were elected to or a term which ends on the date of an annual meeting as determined by the other members of the board subject to the restrictions of law and the corporate documents of the entity.

Quorum and Director Conflicts (N-PCL Section 708)

The last change of the act is the wording of N-PCL Section 708, so that members of the board of directors who must recuse themselves from a vote due to a conflict of interest or related party transaction still count in determining if there was a quorum present at the meeting. Significantly, this means that recused directors may attend to help establish a quorum but no longer count for purposes of determining the number of affirmative votes necessary for a board action.

Please contact WMcManus@cbmslaw.com for questions regarding this update.

Late Portability Election: New Relief Available

The IRS has just changed the timeframe for filing a late portability election for federal estate tax purposes. This is extremely important to those who did not timely file a federal estate tax return (Form 706) when the first spouse died.

By Robert S. Barnett and Gregory L. Matalon

The IRS has just changed the timeframe for filing a late portability election for federal estate tax purposes. This is extremely important to those who did not timely file a federal estate tax return (Form 706) when the first spouse died. Previously, the IRS only allowed a late portability filing (in certain circumstances) within two years of death—this change extends the filing period to five years from date of death. Prior to this recent change, if Form 706 was not filed the executor would have to request special dispensation from the IRS: a private letter ruling request, which was costly and not guaranteed.

Background

Each U.S. citizen and U.S. resident is entitled to federal estate and gift tax exemptions of $12,060,000 in 2022. Prior to 2010, after a spouse died, complex planning and use of trusts was often necessary to secure the first deceased spouse’s federal estate exemption.  The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, provides relief for clients who fail to plan. The 2010 Act allows for the “portability” of the deceased spouse’s unused federal estate and gift tax exemption and was made effective for decedents dying and gifts made after Dec. 31, 2010.

In essence, portability allows the surviving spouse to utilize the available estate and gift exemption from the deceased spouse, without the use of complicated trusts and other planning mechanics. The 2010 Act refers to the “portable amount” as the deceased spousal unused exemption (often defined as DSUE).  DSUE is the lesser of the basic exclusion amount of the first deceased spouse; or the excess of the applicable exclusion amount of the last deceased spouse over the amount with respect to which a tentative tax is determined. While this definition is confusing, the following example provides clarity:

A spouse dies in 2022, having made no lifetime gifts and with a last will and testament that provides all assets pass to the surviving spouse. The surviving spouse will have the benefit of decedent’s full $12,060,000, to use during the life of the surviving spouse to make gifts, and the remaining exemption amount can be used by the executor of the surviving spouse’s estate to reduce the estate tax, even when the surviving spouse dies after 2026, which is when federal estate tax exemptions are reduced by one-half.

In order for the surviving spouse to utilize the remaining exemption of the first deceased spouse, the executor of the decedent’s estate must elect portability of DSUE on a timely-filed Form 706. Treas. Reg. §20.2010-2 states that the timely filed election is made with the Form 706 within nine months after the decedents date of death, or on the last day for the required filing if a proper extension of time has been obtained. The regulations state that the Form 706 must be properly prepared; however, special rules allow for streamlined reporting with respect to estates and transfers which are deductible under the marital deduction and/or charitable deduction provisions. The amount of DSUE portable to the surviving spouse is calculated and reported to the IRS on Form 706, page 4, Part 6, §C. Many estates will be able to utilize this streamlined reporting and are only required to report the description, ownership, and beneficiary of such property along with the executor’s best estimate of value. The reporting allows for a cost-effective method of preparing the Form 706.

Late Filing Relief

Many taxpayers failed to file Form 706 because the value of the first deceased spouse’s estate did not require such a filing. However, asset appreciation, together with assets owned by the surviving spouse, and the upcoming reduction to the federal estate and gift tax exemptions has many surviving spouses wishing to make late portability elections.

The IRS recently issued Rev. Proc. 2022-32 which extends the two-year relief period from Rev. Proc. 2017-34 to five years. The IRS has stated that the purpose of this new procedure is to reduce the number of private letter ruling requests, thereby alleviating a burden on the IRS and taxpayers. Under this simplified method the executor makes the portability election by filing a complete and properly prepared Form 706 on or before the fifth anniversary of the decedent’s date of death and placing on the top of the Form 706 “FILED PURSUANT TO REV. PROC. 2022-32 TO ELECT PORTABILITY UNDER SEC. 2010(c)(5)(A).” This procedure is extremely beneficial and will save the time and expense of filing a private letter ruling request. Decedents who were citizens or residents of the United States on the date of death are eligible to use this simplified method provided the gross estate was under the filing threshold. No user fee is required for returns filed under the Revenue Procedure, thereby making a late portability election cost-effective for taxpayers. Estates that have not elected portability on a timely-filed Form 706 or utilized Rev. Proc 2017-34, should consider filing under the new guidance.

Estates Beyond the Fifth Anniversary of Death

The Revenue Procedure clarifies that if the estate is not within the scope encompassed by the procedure due to the five-year election period (but not due to the size of the estate) the executor may request an extension of time to make the portability election by submitting a private letter ruling request under the provisions of Treas. Reg. §301.9100-3. From experience, private letter ruling requests for portability are generally granted favorable relief if the estate was under the required estate tax filing threshold. Due to the cost of obtaining the private letter ruling, many estates do not seek relief.

Example: Portability Election Tax Savings

Facts: H dies in 2019 having a taxable estate of $5,000,000 consisting of a residence valued at $1,750,000, an IRA of $500,000 and stocks and bonds of $2,750,000. Surviving spouse receives all of H’s assets pursuant to H’s will and/or beneficiary designation, and therefore H has no taxable estate. H’s estate is also under the federal estate tax filing threshold and the procedure under Rev. Proc. 2022-32 is available. H’s surviving spouse dies in January 2026 with a total estate of $8,000,000. No portability election was made.

Law: In 2019, the federal estate tax basic exclusion amount was $11,400,000. On Jan. 1, 2026, the federal estate tax exemption will be reduced by one-half (currently the federal estate tax basic exclusion amount is $12,060,000). As such, assume a 2026 federal estate tax exemption of $6,500,000.

Issue and Analysis: Should the executor of H’s estate file a Form 706 under the guidance provided in Rev. Proc. 2022-32? Without a portability election, the surviving spouse’s estate would be subject to a federal estate tax (at a tax rate of 40% and assuming no deductions) of $600,000.

The executor of H’s estate should file a federal estate tax return to elect portability. By electing portability, the federal estate tax at the surviving spouse’s death will be zero thanks to Rev. Proc. 2022-32.

If the surviving spouse lives in New York state, a state level estate tax (assuming no deductions) of $773,200, will be due. Note: For federal estate tax purposes the New York state estate tax is a deduction—thereby reducing the federal estate tax estimated above to $290,720, instead of $600,000.

While not a focus of this article, with pre- and post-mortem estate planning, including the use of a renunciation and a properly drafted credit shelter trust, the New York state estate tax calculated above can also be eliminated—a savings to the beneficiaries of the estate of $773,200. New York state does not have portability for the unused New York state estate tax exemption and the prior need for more complex planning is necessary.

Conclusion

Rev. Proc. 2022-32 provides a cost-effective method to file a Form 706 to make a late portability election. With increased client wealth and the reduction to the federal estate tax exemption on Jan. 1, 2026, attorneys and tax advisors should recommend portability for all current and older estates to reduce or eliminate federal estate tax. Attorneys should communicate these rules and document their client’s decision in their files.

Gregory L. Matalon (gmatalon@cbmslaw.com) is a trusts and estates partner at Capell Barnett Matalon & Schoenfeld. Robert S. Barnett (rbarnett@cbmslaw.com) is a tax and business partner at the firm.