With tax season nearly over, many taxpayers are frantically trying to beat the infamous April 15th deadline to get their personal income tax returns filed and any corresponding taxes paid. As you rush to get your return done, don’t forget that you may need to file a gift tax return as well this year.
Tax experts anticipate that twice as many gift tax returns will be filed this year as were filed last year. The dramatic increase is due to the fact that many taxpayers made large gifts last year to ensure that they could tax advantage of the historically high lifetime exemption limit to the estate and gift tax. Although the 2012 limit was eventually made permanent by Congress, many taxpayers had already made significant gifts. Those gifts must be reported on IRS Form 709 which can be downloaded from the IRS Forms website.
Gifts must be reported to the IRS whether gift tax is due on them or not. Among other reasons, this is because the IRS wants to be able to keep a record of lifetime gifts made by each taxpayer so they will know when the lifetime exemption limit is surpassed, triggering the payment of gift and estate taxes. Just as the IRS keeps a record, so should you. When you throw away old tax returns, be sure not to throw away your gift tax returns. When it comes time for your estate to be probated, your heirs may need records showing what gifts you made during your lifetime and what tax you paid on those gifts.
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