With the uncertainty of the fiscal cliff in 2012, many people accelerated their gifting to take advantage of the favorable gift tax rates and exemptions. Although the actual gifting has already taken place, the gifting process must be completed by filing a Form 709 Gift Tax Return, and the deadline is looming at April 15, 2013. Here are a few things to keep in mind:
- Amount of the Gift – In general, for any gifts made in excess of the annual exclusion ($13,000 for 2012), you will probably need to file a Form 709. However, there are certain exceptions, and you should consult your CPA or attorney to confirm whether or not you need to file a Form 709. Even if you will not have to pay any gift tax on the gift, you still need to file a Form 709 return.
- Valuations and Discounting – If your gifting requires any valuations, as is common in the gifting of partnership interests, you must get the valuations to your preparer as soon as possible. If you have not made arrangements to do so, you may have to file an extension. Also, if your gifting utilized any valuation discounts, make sure the valuation adequately explains the discounting, and that the preparer further explains it to the IRS.
- Gift Splits – Keep in mind whether married couples are making separate gifts, or a mutual gift that will utilize gift splitting between the spouses. Spouses, whether making separate or combined gifts, must each file their own Form 709 tax return.
- Previous Gifts – If you have made prior gifts, you will need to report those gifts on your current Form 709, to keep track of the exemptions and any gift tax owed.
- Annual Exclusion – If you have made a gift, you can only take the $13,000 annual exclusion (for 2012) if it is a gift of a present interest. This could possibly be an issue for gifts made to irrevocable trusts.
It is better to be safe than sorry when it comes to taxes. If you have any concerns or questions about the gifts you have made, make sure you talk with the attorney who did your gifting and/or to your CPA. Also, if you have any concerns about your Form 709 being filed on time, make sure you get an extension to be avoid any penalties or interest.
On a different note, the fiscal cliff deal has maintained much of the favorable gift tax exemptions and rates. If you have any gifting you would like to do in the meantime, please contact our law offices and we can assist you.