IRS 709 Explained

What is IRS 709?

IRS 709, known as the United States Gift (and Generation-Skipping Transfer) Tax Return, is a tax form used to report gifts made during a calendar year and to calculate any potential gift tax owed. This form is essential for individuals who have given significant gifts, as it helps in keeping track of lifetime gift tax exemptions and ensuring compliance with federal tax laws.

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Purpose of IRS 709

The primary purpose of IRS 709 is to collect data on gifts given by individuals that exceed the annual exclusion amount set by the IRS. Reporting these gifts is crucial for various reasons, including:

1.

Ensuring compliance with gift tax regulations.
2.

Calculating any applicable gift tax owed.
3.

Tracking the lifetime gift exemption, which can affect estate tax calculations in the future.

Where is IRS 709 used and by whom?

IRS 709 is utilized by a range of individuals and entities. Let’s break down the typical user groups and their specific scenarios:

1.

Individuals: Anyone who makes a gift that exceeds the annual exclusion amount, which is $17,000 per recipient for 2023, must file this form. For example, parents who give their children cash or property valued above this limit.
2.

Business owners: Owners might need to report gifts of business interests, properties, or assets to family members or others that exceed the annual limit, affecting ownership shares and partnership structures.
3.

Trustees: If a trust makes a gift that exceeds the exclusion limit, the trustee is required to file IRS 709 to report the transaction adequately.

Step-by-step: how to fill out IRS 709

Filling out IRS 709 can seem daunting, but it's manageable if you follow these step-by-step instructions:

1.

Part 1: Provide your name, address, and taxpayer identification number (TIN).
2.

Part 2: Report details of the gifts: the recipient's name, the date of the gift, and the fair market value.
3.

Part 3: Calculate the total amount of gifts that will count against your lifetime exemption.
4.

Part 4: Provide any information regarding generation-skipping transfers, if applicable.
5.

Part 5: Sign and date the form.

Using pdfFiller, you can easily complete this form electronically, allowing for seamless edits and the opportunity to eSign as required.

Who is required to complete IRS 709?

Individuals or entities are mandated to complete IRS 709 under specific conditions. You are required to file this form if:

1.

You have gifted more than the annual exclusion amount to a single recipient in a given year.
2.

You received gifts from others that total more than the annual limit.
3.

You made a generation-skipping transfer, which is a gift made to a person who is more than one generation below you.

Information you need to complete IRS 709

Before you start filling out IRS 709, gather the following information:

1.

Your name and Social Security number.
2.

The recipient's name and Social Security number.
3.

The date of each gift and its fair market value.
4.

Details regarding any prior gifts made in the same year.
5.

Documentation supporting the valuations of gifts, especially for property or complex assets.

How to submit IRS 709

Submitting IRS 709 can be done through several channels:

1.

Mail: Print the completed form and mail it to the appropriate IRS address based on your location.
2.

Online: Currently, IRS 709 must be filed via mail, as the IRS does not support online submissions for this form.
3.

Deadlines: The form must be submitted by April 15 of the year following the year in which the gift was made. If you need more time, you can file for an extension.

When to update or refile IRS 709

Certain situations may require you to update or refile IRS 709:

1.

If you made additional gifts to the same recipient that exceed the annual exclusion after your initial filing.
2.

If there are changes to the value of the gifts reported due to reassessment.
3.

If you initially filed without the correct information, you must file an amended return for correction.

What happens if you don’t file IRS 709?

Failing to file IRS 709 can lead to various consequences, including:

1.

Potential penalties and interest on unpaid tax, if any is owed.
2.

A reduction in your lifetime gift tax exemption.
3.

Legal troubles or increased scrutiny from the IRS, which can affect your overall tax situation.

It's important to remain compliant to avoid these issues and protect your financial future.

Fill out IRS 709 online

Get the latest version of the form and complete it in minutes.

Get IRS 709

Frequently Asked Questions About the IRS 709

What is the IRS 709 tax form and who needs to file it?

The IRS 709 tax form, also known as the United States Gift (and Generation-Skipping Transfer) Tax Return, is required for individuals who make gifts that exceed the annual exclusion limit. If you gift more than $15,000 to an individual in a given year, you must file the IRS 709. Understanding this form is essential for managing your gift taxes and ensuring compliance with federal regulations.

When is the deadline for filing the IRS 709?

The deadline for filing the IRS 709 is April 15th of the year following the tax year in which the gifts were made. However, if you file for an extension on your federal income tax return, you automatically receive an extension for the IRS 709 as well. It’s important to remember that while filing late may incur penalties, the gift tax itself is only due if you exceed your lifetime exemption.

How do I report multiple gifts on the IRS 709?

When reporting multiple gifts on the IRS 709, you will need to detail each separate gift made within the tax year, including the recipient's information and the value of each gift. Each entry must be clearly specified to avoid complications during tax assessments. Properly documenting all gifts can significantly affect your tax liabilities and exemption amounts.

Can I file IRS 709 electronically?

As of now, the IRS does not allow for the electronic filing of the IRS 709 tax form. Taxpayers must print the completed form and submit it via traditional mail. It's vital to ensure that you're using the latest version of the IRS 709 to avoid processing delays or compliance issues.

What are the penalties for not filing the IRS 709 on time?

Failing to file the IRS 709 by the appropriate deadline can result in penalties, which may amount to 5% of the unpaid gift tax for each month the return is late. The maximum penalty can reach up to 25%. Additionally, interest on any unpaid tax liability will accrue until the balance is paid in full, making timely filing essential.

What information is required to complete the IRS 709 form?

To complete the IRS 709 form, you must provide key information, such as the recipient's name, relationship, and the value of the gift. You'll also need information regarding any prior gifts made during the current year, as well as calculations for your lifetime gift tax exemption. Gathering accurate documentation will make the process smoother and help ensure compliance.

Are there exclusions for gifts reported on the IRS 709?

Yes, there are certain exclusions when filing the IRS 709. The annual exclusion allows you to gift up to $15,000 per recipient without incurring gift tax or needing to file the form. Additionally, educational and medical expenses paid directly to institutions on behalf of the recipient are also excluded from the gift tax calculations.

What is the difference between the IRS 709 and IRS 706 forms?

The IRS 709 and IRS 706 forms serve different purposes in the gift and estate tax realm. The IRS 709 is specifically for reporting gifts made during your lifetime that exceed the annual exclusion, whereas the IRS 706 is used to report estates and their associated taxes after someone has passed away. Understanding the differences is crucial for effective estate and gift tax planning.

Can marital gifts be excluded from the IRS 709 report?

Marital gifts are indeed excluded from IRS 709 reporting under the unlimited marital deduction. This means that you can gift any amount to your spouse without triggering gift tax obligations or needing to file the IRS 709, provided your spouse is a U.S. citizen. However, be aware that if your spouse is not a citizen, there are limitations to the exempt amount.

What should I do if I need assistance with the IRS 709?

If you require assistance with the IRS 709, it’s advisable to consult with a tax professional or an attorney who specializes in estate and gift taxation. They can provide personalized guidance and ensure that you're compliant with all regulations. Additionally, utilizing resources and tools from platforms like pdfFiller can help streamline document creation and management in this area.

Author:

by Iryna Marchuk

Lead Writer/Blogs Manager at airSlate

Disclaimer: This content is for informational purposes only. It is not legal or other professional advice. airSlate provides this material on an "as-is" basis and disclaims all representations, guarantees, or warranties, whether express, implied, or statutory, including but not limited to warranties of merchantability, fitness for a particular purpose, or accuracy.