Tax returns with no tax due can preserve future benefits

Would you know what to tell a client who asks why a return needs to be filed when no tax is due?

This question can arise with gifts, estate and trust administration, along with survivor planning. In some situations, filing is about reporting a transaction or preserving a tax benefit rather than paying tax with the return.

NATP’s Tax Season Updates (TSU) uses a multigenerational family scenario to show when these filing decisions come up in practice. Use the TSU map to find an in-person workshop near you, or choose a virtual option.

Examine the reason for filing

A balance due is just one reason a taxpayer may have a filing obligation or choose to file a return. Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, is one such example.

TSU examines when gift reporting is required and which transfers may create reporting or documentation issues. The practitioner checkpoint becomes discovering whether something occurred during the year that should trigger a closer look at the gift tax filing rules.

Here, targeted client intake is important. A preparer who looks only for taxable income may never hear about a significant transfer of property that occurred during the year.

The same principle applies after a death. The absence of an estate tax bill does not mean there are no filing decisions to make. Estate administration can involve determining what belongs on the decedent’s final individual return and what belongs to the estate or trust. TSU specifically addresses when Form 1041, U.S. Income Tax Return for Estates and Trusts, is required and how estate or trust activity affects the beneficiary’s return.

Filing can preserve something for later

Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, illustrates a different reason the tax-due question can be misleading. TSU covers situations in which an estate may file Form 706 to elect portability even when it would not otherwise have an estate tax filing requirement.

Practitioners may need to explain that a return that appears unnecessary based on current estate tax liability can still serve another purpose.

These filing decisions should not be viewed in isolation. TSU’s Trending Topics and Tax Strategies session follows a multigenerational family through gifting, estate administration, retirement decisions and survivor planning so practitioners can see how the filings connect to events occurring over time.

Add a new viewpoint to your intake process

Before deciding no additional return is needed, ask whether the client made any significant gifts or was involved with an estate or trust during the year.

• Did the client give away significant property or assets?
• Was there a death during the year?
• Is an estate or trust being administered?
• Could a survivor benefit from a filing election, such as portability?

Recognizing the facts that warrant a closer look at whether another return or election should be considered is key.

Work through no-tax-due filing situations with TSU

NATP’s 2026 Tax Season Updates covers these situations as part of its practical review of the issues tax professionals will encounter during the upcoming filing season. TSU is available both in person and virtually, with the in-person program offering a choice of one or two days and virtual TSU providing a three-day format.

➙ Open the TSU map, enter your ZIP code and find an in-person workshop near you. Virtual Tax Season Updates are also available.