Gift Taxes, Apple Gleaning

We encounter a lot of confusion about the federal gift tax rules. Anyone can give anyone else up to $14,000 per year without needing to file a gift tax return. This means a married couple can give another married couple up to $56,000 in 2013 without filing a return. But if you need or want to give more, that doesn’t mean anyone will pay a tax on the gift. Right now we have a unified gift and estate tax – an individual can give away $5.25 million dollars during life or after death, or any combination, without paying a gift or estate tax. Recipients are never taxed on the gift. For annual gifts above the $14,000 exclusion amount, the IRS just wants you to file a return so that, upon your death, it can add up the gifts you made and determine if you used up that $5.25 million credit.

Even the non-reportable “annual exclusion” gifts need to be carefully documented. Watch out for inadvertent gifts – like forgiving a private loan with a value over $14,000. And that three-year statute of limitations you’ve heard about for the IRS auditing your returns? It doesn’t apply if you failed to file a gift tax return when you were supposed to, and the IRS could assess failure-to-file penalties decades later.

If you have questions about gifts and gift tax returns, please call the office and make an appointment. Our standard $250 consultation fee applies.