Rev. Rul. 2025-15
Internal Revenue Bulletin 2025-32 · 2026-10-03 edition · updated 2026-10-04 · United States
ISSUES
(1) Under the facts presented (in which a retirement plan distribution check, defined in the facts presented as Check 1, was not cashed), is an adjustment or refund available under sections 6413 and 6414 of the Internal Revenue Code for amounts withheld and remitted with respect to Check 1?
(2) Under the facts presented (in which a subsequent retirement plan distribution check, defined in the facts presented as Check 2, was mailed), what federal income tax withholding obligations apply under section 3405 with respect to Check 2?
(3) Under the facts presented, what reporting obligations apply under section 6047(d) with respect to Check 1?
(4) Under the facts presented, what reporting obligations apply under section 6047(d) with respect to Check 2?
FACTS
Employer M is the plan administrator of Plan X, a qualified retirement plan under section 401(a) that does not include designated Roth accounts under section 402A, hold employer securities, or provide benefits described in section 104 (compensation for injuries or sickness) or section 105 (amounts received under accident and health plans). Individual C, a U.S. person under section 7701(a)(30) (A) with a calendar year taxable year, has an accrued benefit in Plan X with a value of $800, has not made a withholding election under section 3405 with respect to the accrued benefit, and has no investment in the contract within the meaning of section 72 with respect to the accrued benefit. In 2024, Employer M made a des
ignated distribution within the meaning of section 3405(e)(1) of Individual C’s $800 accrued benefit by withholding federal income tax in the amount required under section 3405 (and, thus, reducing the accrued benefit by the withheld amount), remitting that amount to the Department of the Treasury (Treasury Department), and mailing a check for the remainder (Check 1) to Individual C at Individual C’s address on file. After the designated distribution was made, Individual C did not earn any additional accrued benefit under Plan X on account of compensation from or service for Employer M. Check 1 was not cashed within six months after the date on the check, and Employer M cancelled the check. 1 Subsequently, Employer M mailed a second check (Check 2) in the amount of Individual C’s accrued benefit at the time of issuance of Check 2 (net of applicable withholding, if any, required under section 3405) to Individual C.
LAW AND ANALYSIS
(1) Withholding
(A) In general
Section 3405 provides federal income tax withholding rules with respect to designated distributions as defined under section 3405(e)(1). With respect to specified plans, including a plan described in section 401(a), section 3405(d)(2) provides that the plan administrator shall withhold and be liable for payment of the tax required to be withheld under section 3405 unless the plan administrator directs the payor to withhold the tax and provides the payor with such information as the Secretary may require by regulations.
(B) Issuance of Check 1
(i) Possibility of adjustments for income tax withheld with respect to a designated distribution
Section 6413(a)(1) provides that, if more than the correct amount of tax
1 The results under this revenue ruling would be the same if the drawee was no longer obligated to make a payment with respect to Check 1 for any other reason.
2 Section 3405(f)(1) provides that any designated distribution is treated as if it were wages paid by an employer to an employee with respect to which there has been withholding under section 3402.
3 Proper adjustment of an overpayment of income tax withholding may involve offsetting future withholding obligations. See §§ 31.6413(a)‑1(b) and 31.6413(a)‑2(c).
4 Section 6413(a)(1) also applies with respect to sections 3101, 3111, 3201, and 3221, which relate to the Federal Insurance Contributions Act and the Railroad Retirement Tax Act.
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regulations. 5 In part, § 31.6413(b)‑1 refers to § 31.6414‑1 for provisions related to refunds of tax imposed by section 3402. Pursuant to § 31.6414‑1(a)(1), the refund authority under section 6413(b) applies only to the extent that the amount paid to the Treasury Department was in excess of the amount deducted and withheld by the employer or withholding agent.
Similar to section 6413(b), section 6414 provides that, in certain circumstances involving income tax withholding, a refund or credit to the employer or to the withholding agent may be available. Pursuant to section 6414 and § 31.6414‑1(a)(1), the refund or credit authority under section 6414 applies only to the extent that the amount paid to the Treasury Department was in excess of the amount deducted and withheld by the employer or withholding agent.
Under the facts presented, Employer M made a designated distribution within the meaning of section 3405(e)(1) with respect to Individual C’s accrued benefit by withholding federal income tax as required under section 3405, remitting that amount to the Treasury Department, and mailing Check 1. Accordingly, because the amount deducted and withheld by Employer M from the designated distribution was the same amount paid by Employer M to the Treasury Department, Employer M is not entitled to a refund under section 6413(b) or 6414.
(C) Issuance of Check 2
Under the facts presented, Employer M mailed a second check, Check 2, to Individual C. If the amount of Individual C’s accrued benefit under Plan X at the time of the issuance of Check 2 is less than or equal to the amount of Check 1, no federal income tax withholding is required in connection with the issuance of Check 2
because Employer M withheld the amount required under section 3405 from Individual C’s accrued benefit under Plan X in connection with the issuance of Check
- If the amount of Individual C’s accrued benefit under Plan X at the time of the issuance of Check 2 is greater than the amount of Check 1 (for example, because of earnings), the excess amount is a separate designated distribution subject to withholding at the time of the issuance of Check 2. 6
(2) Reporting
(A) In General
Section 6047(d) provides that the Secretary of the Treasury shall, by forms or regulations, require the employer maintaining a plan from which designated distributions (as defined in section 3405(e)(1)) may be made, or the plan administrator of that plan, to make returns and reports regarding the plan. However, pursuant to section 6047(d)(1), no such return or report may be required with respect to distributions to any person during any year unless the distributions aggregate $10 or more.
Form 1099‑R, Distributions From Pensions, Annuities, Retirement or Prof- it‑Sharing Plans, IRAs, Insurance Con- tracts, etc., is used to satisfy the reporting obligations under section 6047(d). Under the 2024 instructions to Form 1099‑R, a Form 1099‑R must be filed for each person to whom a designated distribution of $10 or more has been made, and the total amount of the distribution (before federal income tax or other withholding) must be reported in Box 1 of that form. In addition, under those instructions, the taxable amount must be reported in Box 2a unless the plan administrator is unable to reasonably obtain the data needed to compute the
taxable amount, and the federal income tax withheld must be reported in Box 4 of the Form 1099‑R.
(B) Issuance of Check 1
With respect to the distribution of Individual C’s accrued benefit at the time of issuance of Check 1, Employer M must report the designated distribution ($800) in Box 1 of Form 1099‑R for 2024. 7 In addition, because Individual C has no investment in the contract within the meaning of section 72 and no exception to income inclusion under section 402(a) applies, Employer M must report the same amount ($800) in Box 2a and must report the federal income tax withheld in Box 4.
(C) Issuance of Check 2
With respect to the distribution of Individual C’s accrued benefit at the time of issuance of Check 2, if the amount of Individual C’s accrued benefit under Plan X at the time of the issuance of Check 2 is less than or equal to the amount of Check 1, Employer M is not required to report the distribution on Form 1099‑R. If the amount of Individual C’s accrued benefit under Plan X at the time of the issuance of Check 2 is greater than the amount of Check 1, Employer M generally 8 must report the excess amount in Box 1 and Box 2a on Form 1099‑R for the year of the distribution and report any federal income tax withheld in Box 4 on that Form 1099‑R.
HOLDINGS 9
(1) No adjustment or refund is available under sections 6413 and 6414 with respect to the amounts withheld and remitted with respect to Check 1.
5 Section 6413(b) also applies with respect to sections 3101, 3111, 3201, and 3221.
6 Under certain circumstances, federal income tax withholding with respect to a designated distribution is not required. For example, under § 31.3405(c)‑1, Q&A‑14, no withholding is required if the amount of an eligible rollover distribution (as defined in section 402(f)(2)(A)) is less than $200 (subject to rules with respect to aggregating distributions within one taxable year).
7 This reporting requirement applies without regard to whether the check is returned as undeliverable or remains uncashed for any other reason.
8 See section 6047(d)(1) (regarding $10 reporting threshold).
9 Revenue rulings represent the conclusions of the Internal Revenue Service on the application of the specific provisions of law addressed in the revenue ruling to the pivotal facts stated in the ruling. Accordingly, for example, this revenue ruling does not address: (1) the appropriateness of mailing a check to an address on file that the plan administrator has reason to believe is incorrect; (2) a situation in which a second check is issued by any person other than the issuer of Check 1, including, for example, the Pension Benefit Guaranty Corporation (PBGC) following a transfer of an amount to the PBGC’s Missing Participants Program (29 CFR Part 4050), or issued to anyone other than Individual C (for example, to the surviving spouse of Individual C); (3) any aspect of the PBGC’s Missing Participants Program; or (4) issues under title I of the Employee Retirement Income Security Act of 1974, Pub. L. 93-406, 88 Stat. 829, as amended. With respect to item (3), PBGC has informed the Treasury Department and the Internal Revenue Service that PBGC is considering possible modifications to its Missing Participants Program regarding the treatment of prior tax withholding in connection with the transfer of benefits to the program.
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fiable recipients beyond those accruing to the general public must identify those services, determine whether user fees should be assessed for those services, and, if so, establish user fees that recover the full cost of providing those services, unless an exception to the full cost requirement is granted. As required by the IOAA and OMB Circular A-25, agencies are to review user fees biennially and update them as necessary to reflect changes in the cost of providing the underlying services.
Background and Explanation of Provisions
A. Estate Tax Closing Letter User Fee
On September 28, 2021, the Department of the Treasury (Treasury Department) and the IRS published final regulations (TD 9957) in the Federal Register (86 FR 53539) establishing a $67 user fee to apply to requests for the issuance of an estate tax closing letter, based on a 2019 Cost Model. As explained in the Background section of the preamble of TD 9957, the issuance of an estate tax closing letter constitutes the provision of a service and confers special benefits to authorized persons requesting such letters beyond those accruing to the general public. Therefore, the IRS is authorized, pursuant to the IOAA and OMB Circular A-25, to charge a user fee for the issuance of an estate tax closing letter that reflects the full cost of providing this service. See also section 6103(p)(2)(B) (allowing for a reasonable fee for furnishing return information to any person).
In 2021, the IRS conducted a biennial review of the estate tax closing letter user fee and issued a new Cost Model that resulted in no change to the $67 user fee.
In 2023, the IRS conducted a biennial review of the estate tax closing letter user fee and issued a new Cost Model, which determined that the full cost of issuing estate tax closing letters to authorized persons is $56.
B. Calculation of User Fees Generally
The IRS follows generally accepted accounting principles (GAAP) in calculating the full cost of providing services.
(2) If the amount of Individual C’s accrued benefit under Plan X at the time of the issuance of Check 2 is less than or equal to the amount of Check 1, no federal income tax withholding obligations apply with respect to Check 2. If the amount of Individual C’s accrued benefit at the time of issuance of Check 2 is greater than the amount of Check 1, the excess amount is subject to withholding in accordance with section 3405.
(3) With respect to Check 1, Employer M must report, on Form 1099‑R for 2024, the designated distribution ($800) in Boxes 1 and 2a and the federal income tax withheld in Box 4.
(4) If the amount of Individual C’s accrued benefit under Plan X at the time of the issuance of Check 2 is less than or equal to the amount of Check 1, no reporting obligations apply with respect to Check 2. If the amount of Individual C’s accrued benefit at the time of issuance of Check 2 is at least $10 greater than the amount of Check 1, the excess amount is subject to reporting in accordance with section 6047(d).
DRAFTING INFORMATION
The principal author of this revenue ruling is Christina Cerasale of the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). Ms. Cerasale may be reached at (202) 317-4102 (not a toll-free number).
CFR part 300
TD 10031
DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 300
Estate Tax Closing Letter User Fee Update
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Interim final rule.
SUMMARY: This document contains interim final regulations relating to the imposition of a user fee on authorized persons requesting the issuance of IRS Letter 627, also referred to as an estate tax closing letter. These regulations reduce the amount of the user fee imposed on a request for the issuance of an estate tax closing letter. The Independent Offices Appropriations Act of 1952 authorizes the charging of user fees. The text of the interim final regulations also serves as the text of the proposed regulations set forth in the notice of proposed rulemaking on this subject in the Proposed Rules section of this edition of the Federal Register .
DATES: Effective date : These regulations are effective on May 20, 2025.
Applicability date : For date of applicability, see §300.12(d).
FOR FURTHER INFORMATION CONTACT: Concerning the interim final regulations, Juli Ro Kim at (202) 317-6859; concerning cost methodology, Maria E. Arias-Buchanan at (202) 8039569 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Authority
This document contains interim final amendments to 26 CFR part 300 regarding user fees for authorized persons who request the issuance of an estate tax closing letter (IRS Letter 627).
The Independent Offices Appropriations Act of 1952 (IOAA) (31 U.S.C. 9701) authorizes each agency to prescribe regulations that establish user fees for services provided by the agency. The IOAA provides that regulations implementing user fees are subject to policies prescribed by the President; these policies are set forth in the Office of Management and Budget Circular A-25, 58 FR 38142 (July 15, 1993) (OMB Circular A-25).
The IOAA states that the services provided by an agency should be self-sustaining to the extent possible. Under OMB Circular A-25, agencies that provide services that confer special benefits on identi
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The Federal Accounting Standards Advisory Board (FASAB) is the body that establishes GAAP that apply for Federal reporting entities, such as the IRS. FASAB publishes the FASAB Handbook of Accounting Standards and Other Pronouncements, as amended, available at https://fasab.gov/accounting-standards/. The FASAB Handbook includes the Statement of Federal Financial Accounting Standards 4: Managerial Cost Accounting Standards and Concepts (SFFAS No. 4) for the Federal government. SFFAS No. 4 establishes internal costing standards under GAAP to accurately measure and manage the full cost of Federal programs. The methodology described below is in accordance with SFFAS No. 4.
1. Cost Center Allocation
The IRS determines the cost of its services and the activities involved in producing them through a cost accounting system that tracks costs to organizational units. The lowest organizational unit in the IRS’s cost accounting system is a cost center. Cost centers usually are separate offices distinguished by subject-matter area of responsibility or geographic region. All costs of operating a cost center are recorded in the IRS’s cost accounting system and allocated to that cost center. These costs include the direct costs for the cost center’s activities and all indirect costs, including overhead, associated with that cost center. Each cost is recorded in only one cost center.
2. Cost Estimation of Direct Labor and Benefits
Not all cost centers are fully devoted to only one service for which the IRS charges a user fee. When cost centers include multiple services, the IRS measures the time required to accomplish activities associated with each service to
estimate the average time spent on the service in the related cost center. The average time devoted is multiplied by the relevant organizational unit’s average labor and benefits cost per unit of time to determine the direct labor and benefits cost incurred to provide the service. To determine the full cost, the IRS then adds an appropriate overhead charge.
3. Calculating Overhead
Overhead is an indirect cost of operating an organization that cannot be immediately associated with an activity that the organization performs. Overhead includes costs of resources that are jointly or commonly consumed by one or more organizational unit’s activities but are not specifically identifiable to a single activity, such as the following:
General management and administrative services of sustaining and supporting organizations
Facilities management and ground maintenance services (security, rent, utilities, and building maintenance)
Procurement and contracting services
Financial management and accounting services
Information technology services
Services to acquire and operate property, plants, and equipment
Publication, reproduction, and graphics and video services
Research, analytical, and statistical services
Human resources/personnel services
Library and legal services To calculate the overhead allocable to a service, the IRS multiplies the current overhead rate by the direct labor and benefits costs of the service. The overhead rate is the ratio of the IRS’s indirect labor, benefits, and non-labor costs of business divisions that do not interact with taxpayers to the direct labor and benefits costs of business divisions that interact with taxpay
ers. The IRS calculates the overhead rate annually based on cost elements underlying the Statement of Net Cost included in the IRS Annual Financial Statements, which are audited by the Government Accountability Office.
For this estate tax closing letter user fee review, the fiscal year (FY) 2023 overhead rate, based on FY 2022 costs, of 62.50 percent was used.
C. Full Cost Determination for the Estate Tax Closing Letter User Fee
The IRS followed the guidance provided by the OMB Circular A-25 guidance to compute the full cost of issuing estate tax closing letters to authorized persons. OMB Circular A-25 explains that the full cost includes all indirect and direct costs to any part of the Federal Government including but not limited to, direct and indirect personnel costs, physical overhead, rents, utilities, travel, and management costs.
1. Request Processing Costs
Requests for estate tax closing letters are processed by employees at grades 5, 8, and 11 of the general schedule (GS-5, GS-8, and GS-11). Approximately 0.65 staff hours are required to review the return, create the estate tax closing letters, and prepare the letters for mailing. The IRS received an average of 8,894 annual requests for estate tax closing letters in FY 2021 and FY 2022, requiring 5,781 staff hours.
Total hours allocated to the cost also must include indirect hours for campus employees, which are calculated by multiplying the number of direct hours by the applicable 60 percent indirect employee rate. Using this information, IRS determined that the total staff hours for processing requests for estate tax closing letters are 9,250 annually.
Direct Staff Hours 5,781 Indirect Hours (60%) + 3,469 Total Hours 9,250
To determine the labor and benefits costs, the IRS divided the 9,250 total hours by 2,080 (the total annual hours worked by a full-time employee (FTE))
to convert the hours to a 4.45 FTE equivalent. The processing of requests for estate tax closing letters is performed primarily (87.7 percent) by employees at
the GS-5 level, but also by employees at the GS-8 level (1.7 percent) and GS-11 level (10.6 percent). The average salary and benefit cost for each of those levels
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was multiplied by that grade’s percentage of processing time to arrive at a $67,355
total cost per FTE. Multiplying the cost per FTE by the 4.45 FTE equivalent
resulted in a total labor and benefits cost of $299,730, as follows:
Total Cost Per FTE $67,355 Total FTE × 4.45 Processing Labor & Benefits $299,730
als spend 0.5 hours reviewing one estate tax closing letter, totaling 133 direct staff hours. The direct staff hours were multiplied by the 60 percent indirect employee rate for campus employees, resulting in a combined total of 213 annual staff hours allocated for quality assurance (QA) reviews, as follows:
2. Quality Assurance Review Costs
Outgoing estate tax closing letters are reviewed by quality assurance professionals at the following Internal Revenue (IR) paybands of the IRS Payband System: IR-10 (87.7 percent) and IR-06 (12.3 percent). Three out of every 100 estate
tax closing letters mailed are reviewed to verify (1) the estate tax closing letter was authorized, (2) the information included in the letter was accurate, and (3) the address was correct. The 8,894 average number of requests for FY 2021 and FY 2022 resulted in 266 letters reviewed. On average, quality assurance profession
Direct Staff Hours 133 Indirect Hours (60%) + 80 Total Hours 213
QA reviews are processed by employees at various IR levels. Dividing the total hours by 2,080 (the total annual hours for each FTE), resulted in 0.10 FTEs. The
average salary and benefits for both IR paybands conducting quality assurance reviews was multiplied by that IR payband’s percentage of processing time to
arrive at the $95,460 total cost per FTE. The total cost per FTE was then multiplied by the total FTE to determine the labor and benefits cost for QA reviews, as follows:
Total Cost per FTE $95,460 Total FTE × 0.1 Quality Assurance Labor & Benefits $9,546
3. Full Cost Per Request Calculation
The IRS applied the 62.5 percent over
head rate to the total labor and benefits cost to calculate the full cost of the estate tax closing letter program.
Processing Labor & Benefits $299,730 Quality Assurance Labor & Benefits + $9,546 Total Labor and Benefits $309,276 Overhead (62.50%) + $193,297 Full Cost $502,573
The $56 cost per request was determined by dividing the full cost by the
average annual volume of requests, as follows:
Full Cost $502,573 Estimated Annual Request Volume ÷ 8,894 Cost Per Request $56
Special Analyses
I. Regulatory Planning and Review
The OMB’s Office of Information and Regulatory Analysis has determined that these regulations are not significant and subject to review under section 6(b) of Executive Order 12866.
II. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that these interim final regulations will not have a significant economic impact on a substantial number of small entities. These regulations, which reduce the amount of a fee to obtain a particular
service, affect decedents’ estates, which generally are not small entities as defined under 5 U.S.C. 601(6). Thus, these regulations have no economic impact on small entities. In addition, the interim final regulations will establish a $56 fee, which is a reduction from the previously established fee and is not substantial enough to have a significant economic impact on any enti
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ties that could be affected by establishing such a fee. Accordingly, the Secretary certifies that the rule will not have a significant economic impact on a substantial number of small entities.
III. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a State, local, or Tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. This rule does not include any Federal mandate that may result in expenditures by State, local, or Tribal governments, or by the private sector in excess of that threshold.
IV. Executive Order 13132: Federalism
Executive Order 13132 (Federalism) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on State and local governments, and is not required by statute, or preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive order. These proposed regulations do not have federalism implications and do not impose substantial direct compliance costs on State and local governments or preempt State law within the meaning of the Executive order.
V. Good Cause
The user fee for the estate tax closing letter applies to all individuals who make a request and pay for the estate tax
closing letter on https://www.pay.gov. It would be unnecessary and contrary to the public interest for the IRS to continue to charge the current, higher user fee during the period provided for public comment on the proposal to reduce that fee. To enable the reduced fee amount to be in effect immediately for authorized persons requesting an estate tax closing letter, the Treasury Department and the IRS find that there is good cause to dispense with (1) notice and public comment pursuant to 5 U.S.C. 553(b) and (c) and (2) a delayed effective date pursuant to 5 U.S.C. 553(d). The Treasury Department and the IRS will consider public comments submitted in response to the cross-referenced notice of proposed rulemaking published in the Proposed Rules section of this issue of the Federal Register and will promulgate a final rule after considering those comments.
VI. Submission to Small Business Administration
Pursuant to section 7805(f) of the Internal Revenue Code, this regulation has been submitted to the Chief Counsel for the Office of Advocacy of the Small Business Administration for comment on its impact on small business.
VII. Congressional Review Act
Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), the Office of Information and Regulatory Affairs designated this rule as not a major rule, as defined by 5 U.S.C. 804(2).
Drafting Information
The principal author of these regulations is Juli Ro Kim of the Office of the Associate Chief Counsel (Passthroughs,
Trusts, and Estates). Other personnel from the Treasury Department and the IRS participated in the development of the regulations.
List of Subjects in 26 CFR Part 300
Estate taxes, Reporting and recordkeeping requirements.
Amendments to the Regulations
Accordingly, 26 CFR part 300 is amended as follows:
PART 300—USER FEES
Paragraph 1. The authority citation for part 300 continues to read in part as follows:
Authority: 31 U.S.C. 9701. Par. 2. Section 300.12 is amended by revising paragraphs (b) and (d) to read as follows:
§300.12 Fee for estate tax closing letter.
(b) Fee . The fee for issuing an estate tax closing letter is $56.
(d) Applicability date . This section applies to requests received by the IRS after May 20, 2025.
Edward Killen , Acting Chief Tax Compliance Officer .
Approved : May 5, 2025.
Kevin M. Salinger , Acting Assistant Secretary of
the Treasury (Tax Policy) .
(Filed by the Office of the Federal Register May 16, 2025, 8:45 a.m., and published in the issue of the Federal Register for May 20, 2025, 90 FR 21410)
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