The Gift that Keeps on Giving?

In the countdown to April 15, many people rushing to prepare their individual income tax returns will overlook another key tax document that’s due the same day: Form 709, covering taxable (or potentially taxable) gifts made during the previous year.

Tax year 2012 is just about to come to a close (in the absence of extensions, etc.). If you made any taxable gifts in 2012, remember to file a gift tax return by the April 15 deadline along with your income tax return.

If you made any gifts in excess of $13,000 (that number is $14,000 for 2013) to anyone in 2012, then you must file a Form 709 Gift Tax Return. Period. In fact, a recent article in Forbes titled “Don't Gamble With Gift Tax Returns” considered this matter in detail.

The humble gift tax return is among the easiest tax document to forget, but it’s also one of the most important to get right. After all, the return is what the IRS uses to assess any possible gift tax. Even if you don’t actually “owe” any gift tax, you still must file the return.

Why?

Gift tax returns that raise red flags or don’t get filed in the first place can be audited just like any tax return. No audit is a good audit.

So, if this is new information to you and you are not ready to file your Form 709, then you can get an extension by filing a Form 8892. Perhaps you need more time to get everything properly documented.

The original Forbes article also has some pointers when it comes to extensions. However, any gift tax must be paid by April 15, if any is owed. Otherwise, you will be hit with interest and potential penalties.

This is a hot topic this year, since 2012 was such a big year for gifting.

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Reference: Forbes (March 22, 2013) “Don't Gamble With Gift Tax Returns”