Form 8971 Instructions: Filing Rules, Schedule A, and Penalties

Form 8971 instructions apply to any executor required to file a federal estate tax return: within 30 days of filing Form 706 (or 30 days after its due date, whichever comes first), you must file Form 8971 with the IRS and deliver a Schedule A to each beneficiary showing the estate tax value of the property they received.¹ Those values lock in each beneficiary’s basis in inherited property and drive the capital gains tax they’ll owe if they later sell.

Who Has to File

The obligation falls on the executor, or on anyone else required to file Form 706 or Form 706-NA. It applies even if the estate owes no estate tax after deductions and credits, and if more than one person is required to file for the same estate, each one has the obligation.¹

Estates too small to require Form 706 don’t file Form 8971. For decedents dying in 2026, the basic exclusion amount is $15,000,000.² A Form 706 filed only to elect portability of a deceased spouse’s unused exclusion, where the estate is below the filing threshold, also doesn’t trigger Form 8971.¹

Property You Don’t Have to Report

The IRS excepts several categories of property from Schedule A because the consistent basis rule doesn’t reach them:¹

Cash and cash equivalents in U.S. dollars: demand deposits, CDs, money market fund shares, and cash collateral held by a third party.
Lump-sum life insurance proceeds on the decedent’s life paid in U.S. dollars.
Federal, state, and local tax refunds paid in U.S. dollars.
Any note the decedent forgave in full upon death.
Household and personal effects that don’t require a formal appraisal under estate tax regulations.
Assets the estate sold in a taxable transaction before distributing them, since gain or loss was already recognized at the estate level.
Income in respect of a decedent, including retirement account distributions and Section 72 annuity contracts, whose basis isn’t derived from estate tax value.

Coins or bills with numismatic value don’t fit the cash exemption and do have to be reported.

The Filing Deadline

The due date is the earlier of two dates: 30 days after Form 706 is due (including extensions), or 30 days after Form 706 is actually filed.¹ Filing Form 706 early starts a 30-day clock right away. Executors who use the full Form 706 extension have 30 days from the extended due date.

If property gets distributed to a beneficiary after the initial Form 8971 has already gone in, a supplemental Form 8971 with an updated Schedule A is due on or before January 31 of the year following the beneficiary’s acquisition.¹

Filling Out Part I

Part I identifies the estate. Enter the decedent’s name, Social Security number, and date of death, along with the estate’s EIN and the executor’s name, address, and Taxpayer Identification Number. Line 9 is where you report the alternate valuation date if the estate elected one under Section 2032. The executor signs to certify the return.

Filling Out Part II

Part II is a summary of every beneficiary who received reportable property. For each one, list the name, TIN or Social Security number, mailing address, the date their Schedule A was furnished, and the total estate tax value of the property they received. The table also tracks the total number of Schedules A attached.¹

Filling Out Schedule A

Prepare a separate Schedule A for each beneficiary, and list only the assets that particular beneficiary received.³ The columns work like this:¹

Column A, item number: a sequential number for each property on the schedule.
Columns B through D, description: match exactly how the property was described on Form 706, including the Form 706 schedule and item number. Include CUSIP numbers for securities and legal descriptions for real estate.
Column E, beneficiary’s interest: describe any partial interest, such as a 50% tenancy-in-common or a life estate.
Column F, estate tax generated: mark “Y” if the asset actually contributed to the estate’s tax liability, or “N” if it was offset by a deduction such as the marital or charitable deduction.
Column G, valuation date: date of death, unless the estate elected the alternate valuation date.
Column H, estate tax value: the fair market value used on Form 706. Report the full value before any reduction for debt, even if Form 706 reported a net figure.

Column F is easy to get wrong. The consistent basis rule only restricts basis for property whose inclusion in the estate actually increased the estate tax. Property passing tax-free under a marital or charitable deduction should be marked “N,” because the beneficiary’s basis in that asset isn’t capped by the reported value.⁴

Where to File and How to Deliver Schedules A

Estates with 10 or more Schedules A must file electronically. Paper filers send the completed Form 8971 with all Schedules A attached to:⁵

Internal Revenue Service
Stop 824G
7940 Kentucky Drive
Florence, KY 41042

Each beneficiary also has to receive their own Schedule A directly from the executor. The IRS accepts delivery in person, by email, by U.S. mail to the last known address, or by private delivery service. Don’t send a beneficiary a copy of the main Form 8971; they only get their Schedule A.¹

The executor certifies the delivery date on Part II. The instructions recommend keeping proof of mailing, proof of delivery, acknowledgment of receipt, or similar documentation.¹ Certified mail or a delivery receipt is a practical safeguard if a beneficiary later says they never received their basis information.

When You Need to File a Supplement

Three situations require a supplemental Form 8971 and updated Schedules A. Check the “Supplemental Filing” box and report only what changed.¹

Property is distributed after the initial filing: the supplement is due by January 31 of the year following the beneficiary’s acquisition.
Values or information change: if an amended Form 706 or an IRS audit changes a reported value, or any previously reported information becomes incorrect or incomplete, the supplement is due within 30 days of the new information becoming available.
Trust distributions: when a trust that received estate property later distributes that property to its own beneficiaries, the trustee must furnish a Schedule A to those beneficiaries.

Penalties for Filing Late or Wrong

Two penalty regimes run in parallel: Section 6721 for failing to file correct Forms 8971 with the IRS, and Section 6722 for failing to furnish correct Schedules A to beneficiaries. Both use the same tiered structure. For returns due in 2026:⁶

Corrected within 30 days of the deadline: $60 per return or statement, capped at $683,000 per calendar year for large filers (over $5 million in gross receipts) or $239,000 for small filers.
Corrected after 30 days but by August 1: $130 per return or statement, capped at $2,049,000 (large) or $683,000 (small).
Not corrected by August 1: $340 per return or statement, capped at $4,098,500 (large) or $1,366,000 (small).
Intentional disregard: $680 per return or statement with no annual cap, or 10% of the amount required to be reported correctly, whichever is greater.⁷

Penalties may be waived if the executor shows the failure was due to reasonable cause and not willful neglect. The exception is real, but it takes genuine justification, not routine oversight.

What This Means for Beneficiaries

Under Section 1014(f), a beneficiary’s initial basis in inherited property generally cannot exceed the value reported on the estate tax return.⁴ A beneficiary who claims a higher basis when selling the property can face a 20% accuracy-related penalty on the resulting underpayment.⁸

The rule only reaches property whose inclusion in the gross estate actually increased estate tax. Assets that passed entirely under a marital or charitable deduction generated no estate tax, so the basis cap doesn’t apply to them.⁴ That’s what Column F on Schedule A signals to the beneficiary.

If Form 8971 is never filed, or a beneficiary never receives their Schedule A, that beneficiary’s initial basis is treated as zero until the information is properly reported.⁹ That’s the outcome the delivery and documentation steps exist to prevent.

1
Internal Revenue Service. Instructions for Form 8971 and Schedule A
2
Internal Revenue Service. What’s New — Estate and Gift Tax
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Internal Revenue Service. About Form 8971
4
Office of the Law Revision Counsel. 26 US Code 1014
5
Internal Revenue Service. Update to Where to File Address for Form 8971
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Internal Revenue Service. 20.1.7 Information Return Penalties
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Office of the Law Revision Counsel. 26 USC 6721
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Office of the Law Revision Counsel. 26 US Code 6662
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eCFR. 26 CFR 1.6662-9 – Inconsistent Estate Basis Reporting