The Gift Tax Return Trap And How To Avoid It
By: Bob Carlson - November 05, 2018
You don’t owe gift taxes and aren’t likely to because of the lifetime estate and gift tax exclusion, so you don’t have file a gift tax return. Right? Wrong, in a number of instances.
You might need to file a gift tax return, even if you won’t owe gift or estate taxes.
For 2018, each individual can exempt up to $11,180,000 of property from estate and gift taxes. Married couples potentially can exclude twice that amount. There’s also the annual gift tax exclusion amount, which is $15,000 for 2018. You can make gifts up to $15,000 per beneficiary during the year, and they won’t be included in your “taxable gifts” during the year. That means they won’t count against your lifetime exclusion amount. You can make these gifts to any number of people during the year, and there’s no lifetime limit.
When your annual gifts or even your entire estate are well below those levels, you still aren’t free from worry about filing gift tax returns. The IRS can impose penalties for not filing a gift tax return, even when no tax was due.
Gifts above the annual gift tax exclusion amount made during the year generally must be reported on Form 709. The gifts might not be taxed, because of the lifetime gift tax exclusion. But the gifts reduce the lifetime exclusion and must be reported so the IRS can track your use of the lifetime exclusion amount.
Article Source: forbes.com