If last year you made significant gifts to your children, grandchildren, or other heirs as part of your estate planning strategy, or you just wanted to provide loved ones with some helpful financial support, it’s important to know when you are required to file a gift tax return.
Some transfers require a gift tax return even if you do not owe any tax. Also, sometimes it is desirable to file a return even if it is not required.
Mandatory Filing Requirement
Generally, you’ll need to file a gift tax return for 2016 if, during the tax year, you made gifts:
- That exceeded the $14,000-per-recipient gift tax annual exclusion (other than gifts to your U.S. citizen spouse),
- That exceeded the $148,000 annual exclusion for gifts to a noncitizen spouse,
- That you wish to split with your spouse to take advantage of your combined $28,000-per-recipient annual exclusions,
- To a Section 529 college savings plan for your child, grandchild or other loved one and wish to accelerate up to five years’ worth of annual exclusions ($70,000) into 2016,
- Of future interests — such as remainder interests in a trust — regardless of the amount, or
- Of jointly held or community property.
No return is required if your gifts for the year consist solely of annual exclusion gifts, present interest gifts to a U.S. citizen spouse, qualifying educational or medical expenses paid directly to a school or health care provider, and political or charitable contributions.
If you transferred hard-to-value property, such as artwork or interests in a family-owned business, you should consider filing a gift tax return even if there is no mandatory filing requirement. You may also want to file a gift tax return to disclose the sale of an asset to a grantor trust. Filing a gift tax return with adequate disclosure for these transfers will trigger the statute of limitations, and generally will limit the IRS to three years to challenge your valuation.
The gift tax return deadline is the same as the income tax filing deadline. For 2016 returns, it’s April 18, 2017 (or October 16 if you file for an extension). If you owe gift tax, the payment deadline is also April 18, regardless of whether you file for an extension.
Have questions about gift tax and the filing requirements? You can reach me at HZemel@BerdonLLP.com or contact your Berdon advisor.
Hal Zemel, a Tax Partner at Berdon LLP, New York Accountants, has nearly 25 years in public accounting and advises businesses in the manufacturing, distribution, advertising, and real estate sectors.