How to file gift tax

how to file gift tax

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Instructions

Determine whether or not you have to file Form 709. In most cases, you are required to file this form if you gave gifts of $13,000 or more to a single party during the year. You are also required to file if you gave a gift of what is known as a "future interest." Any split gift with your spouse necessitates this form as well, irrelevant of the amount of the gift, even if you will not owe taxes on the gift.

Ascertain what gifts you are required to report and whether you will elect to split gifts with your spouse if you are married. If you donated more than $13,000 in cash or property to a single party, then you should make this election to reduce or eliminate unnecessary gift tax. For example, if you donated $20,000 to a needy relative, then you and your spouse should each report a gift of $10,000. If you alone declare the entire amount, then you will have to pay tax on $7,000 of the gift.

Complete Section 1 of the form, providing

your personal information, including name, address, whether or not you will elect to split gifts with your spouse and spousal consent. Executors must also specify the donor's date of death, if he or she passed away during the year.

List each gift made on the appropriate section of Schedule A of Form 709. Schedule A has three parts; one for taxable gifts, one for gifts considered to be direct generational skips, such as gifts to your grandchildren, and the third for indirect generational skips. If you must list gifts on the last two portions of the schedule, then complete Schedule C. Also fill out Schedule B listing prior gifts made in previous years if necessary. These must be reported, because any tax paid on prior gifts can impact the tax ramifications of your current gifts.

Complete part 2 of the Form 709 after all relevant schedules. This section nets total taxable gifts against the donor's unified credit, taking into account taxes paid for prior gifts as well as the foreign tax credit. When you are done, sign and date the return, and mail it to the IRS.

Source: ehow.com

Category: Taxes

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