Gift Tax Return
Filling Gift Tax 709 Return. What section of 709 to report gift of less than $12,000?
I gave $10,000 to each of 21 members of my family. Total $210,000. I know that I do not owe any gift tax (because of the $12,000 exclusion per person), but I would like to report it so that when I die the IRS or my executor will not question why it was not in my estate. In what section of 709 do I report these gifts of less than $12,000?
I would not file Form 709. You would be getting the IRS needlessly involved in your personal business and there is no legal requirement for you to file.
If you paid in check and wrote “Gift” on the memo line you have a paper trail. The other option is to list who you gave money too and when you gave it, say these amounts are gifts, sign and date the list, and leave it with your will so it can be found when needed.
If you really want to fill out Form 709, you would list the gifts on Part 1. Because of the number of people involved you will need to attach the same list that you would need to do in the paragraph above. On Form 709 itself you will total the amounts on the list and write it in Column H.
On part 4 you will copy the number from Column H to line 4. Then you will multiply the number of people you gave the cash to and multiply that by $12,000 and place that number on line 2. On line 3 you will subtract line 2 from line one and enter the results (do not enter less than zero), This will zero out your tax liability. Finish by filling out the front page of the Form and you are all done.
Free Special Report: Gift Tax Return
If you want to gift someone, do not worry about taxes. There are effective strategies available. Right now, if you are giving a gift, your threshold is $12,000 to any one recipient. That’s pretty generous. If you are married, you and your spouse can split the gift-giving threshold, increasing it to $24,000.
This threshold is for gift givers. If you give a gift to a single individual and the value of that gift exceeds $12,000, you must report the total of all gifts to the Internal Revenue Service. The person receiving the gift is not liable for gift or income tax on its value. The receiver of the gift does not even have to report the gift to the Internal Revenue Service.
Qualifying gifts for this threshold are money, real estate, personal property, low interest loans, or future shares in property.
Although you might be required to report gifts in excess of the threshold ($12,000), you can circumvent tax liability by using your unified lifetime credit. For gift tax returns the unified credit is $345,800. The donor is responsible for filing and to pay taxes arising from the gift. That is to say, unified credit applied against a gift tax this year will reduce the amount of unified credit that can be applied against a gift tax in following years.
Let’s say that a taxpayer gives a nephew a gift of $8000 and then gives their son and daughter a cash gift of $25,000 each. Applying unified credit to the gift giving, the first $12,000 given to each person is not taxed. So, the first $12,000 given to the three individuals is not taxable, in each instance. That’s $32,000 of non-taxable gifts.
The gift tax on $26,000 (the remaining $13,000 for both the son and daughter) is $5,120, according to the gift tax table. So, the unified credit of $345,800 is reduced by $5120 and becomes a unified credit amount of $340,680. This is the amount of unified credit that can be applied against gift taxes in following years. There is no gift tax charge for the year in which the gifts were given. However, you must still file a report of all of this to the Internal Revenue Service using form 709.
There are gifts that are generally always non-taxable, such as gifts to your spouse, gifts to a political organization, gifts to charities, medical expenses paid directly to a medical facility or doctor for the benefit of an individual, tuition paid directly to an educational institution for the benefit of an individual, and, of course, gifts below the annual threshold quantity.
About the Author:
Chintamani Abhyankar, is a well known expert in the field of finance and taxation for last 25 years. He has written many books explaining inside secrets of the magic world of personal finance. His famous eBook Stop donating your money to IRS which is now running in its second edition, provides intricate knowledge and valuable tips on personal finance and income tax.
Article Source: ArticlesBase.com – Being generous throughout the year may not hurt at tax time!
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