It’s tax-filing season, and the April deadline to file a 2015 gift tax return is fast approaching. But do you need to file a return? The rules surrounding gift tax returns can be confusing, so let’s review some general guidelines.
A federal gift tax return (Form 709) is required if you:
- Made gifts of present interests — such as an outright gift of cash, marketable securities, real estate or payment of expenses other than qualifying educational or medical expenses (see below) — if the total of all gifts to any one person exceeded the $14,000 annual exclusion amount,
- Made split gifts with your spouse,
- Made gifts of present interests to a noncitizen spouse who otherwise would qualify for the marital deduction, if the total exceeded the $147,000 annual exclusion amount,
- Made gifts of future interests — such as certain gifts in trust and certain unmarketable securities — in any amount, or
- Contributed to a 529 plan and elected to accelerate future annual exclusion amounts (up to five years’ worth) into the current year.
No gift tax return is required if you:
- Paid qualifying educational or medical expenses on behalf of someone else directly to an educational institution or health care provider,
- Made gifts of present interests that fell within the annual exclusion amount,
- Made outright gifts to a spouse who’s a U.S. citizen, in any amount, including gifts to marital trusts that meet certain requirements, or
- Made charitable gifts and aren’t otherwise required to file Form 709 — if a return is otherwise required, charitable gifts should also be reported.
In some cases it’s advisable to file Form 709 to report nongifts. For example, suppose you sold assets to a family member or a trust. Filing a return triggers the statute of limitations and prevents the IRS from claiming, more than three years after you file the return, that the assets were undervalued (and, therefore, partially taxable).
If you made gifts last year and are unsure whether you need to file a gift tax return, we can help you make that determination.