What Is Form 709: United States Gift (and Generation-Skipping Transfer) Tax Return?
IRS Form 709 is used to record asset transactions that may be subject to federal gift tax and certain generation-skipping transfer taxes. This form details any taxable gifts you give to others throughout your lifetime, such as cash or tangible physical assets like real estate. It is also utilized to provide lifelong generation-skipping tax benefits when passing property to a recipient who is not related by blood, marriage, or adoption and is at least 3712 years younger than the donor.
Form 709 must be completed with your tax return for each year in which you make a taxable gift; however, submitting this form does not guarantee that you will incur gift or generation-skipping transfer tax. (The generation-skipping transfer tax is an extra tax levied on a property transfer that skips a generation, often known as a generation-skipping transfer.)
- Form 709 details taxable donations and allocations of generation-skipping tax lifetime exemptions.
- Certain forms of financial donations may be exempt from the gift tax.
- When a generation-skipping trust distributes assets among family members, the generation-skipping tax guarantees that the correct amount of estate tax is paid.
- Form 709 must be submitted and included with your normal tax return each year you make a taxable gift.
Who Can File Form 709: United States Gift (and Generation-Skipping Transfer) Tax Return?
When you give a cash present to someone, you are responsible for paying any gift taxes payable, not the receiver. If you make a gift of cash, property, or other assets to someone during a tax year, you must declare the gift on Form 709.
For IRS reporting purposes, a gift is:
“Any direct or indirect transfer to a person in which full consideration (measured in money or money’s value) is not obtained in return.”
Among the instances that may be deemed taxable gifts are:
- A gift of down payment monies to an adult kid in order to assist them in purchasing a property.
- Cash contributions donated directly to a student to assist with school expenses
- Real estate or other property gifts made to others
- Deposits made into a 529 college savings account on behalf of someone other than yourself or your spouse
- Forgiving debts that you have made to others
However, there are several circumstances in which cash donations are not subject to the gift tax. These are some examples:
- Gifts that are subject to the yearly exclusion limit
- Gifts to your spouse
- Tuition or medical expenditures paid on someone else’s behalf
- Donations to a political group for its use
The yearly exclusion limit for 2021 is $15,000 (increasing to $16,000 in 2022); for married couples filing jointly, the limit doubles to $30,000 (growing to $32,000 in 2022). The restriction applies per beneficiary, so if you’re married with three children, you and your spouse might give up to $30,000 to each of them each year without surpassing the exclusion limit. This is known as gift splitting, and it is only permitted if you and your spouse file a joint tax return.
To avoid the gift tax, tuition or medical expenditures must be paid directly to the biller. If you wish to assist a grandchild with college fees, for example, you must pay tuition directly to the institution. If you instead gave your grandchild the money to pay for their education, it would be considered a taxable gift. The same is true for medical bills. To minimize gift tax concerns, you would need to pay the healthcare provider directly.
Gifts to eligible charities are normally exempt from gift tax and may be tax deductible if you itemize on Schedule A.
How to File Form 709: United States Gift (and Generation-Skipping Transfer) Tax Return
Unless you qualify for one of the previously listed exemptions, you must submit Form 709 for every tax year in which you make a taxable gift. You cannot complete this form online if you submit your tax returns electronically using online tax preparation software. Form 709 must be printed and sent to the IRS; it is one of just a few tax forms that cannot be submitted electronically.
The form is a five-page document divided into parts that cover:
- Personal information
- Financial contributions made by you
- Specifics on generation-skipping transfers
Form 709 is a yearly return. The yearly filing date for Form 709, along with the rest of your tax return, is April 15. The yearly filing date for most tax years is April 15. In general, you must submit Form 709 no sooner than January 1 and no later than April 15 of the year after the gift.
You may request for a tax extension if you believe you will need extra time to prepare your return. Filing an extension gives you till October 15 to complete your return. Fill out IRS Form 8892 to seek a six-month delay for submitting Form 709. It’s vital to remember that this form only applies to gift tax or generation-skipping tax filing extensions. If you want an extension to submit the remainder of your tax return, you must also complete IRS Form 4868.
Download Form 709: United States Gift (and Generation-Skipping Transfer) Tax ReturnHere
Form 709 may be downloaded at the IRS website. To report gift taxes and generation-skipping tax exemptions, utilize this form when completing your tax return. Although the form is five pages lengthy, depending on the facts you’re reporting for the year, you may not need to complete all parts.
If you are new with tax rules, completing and submitting Form 709 may be complex, so you should contact a tax expert before concluding your return.
If you’re submitting a paper return and printing off a copy of Form 709, send them both to the IRS at the following address: Department of the Treasury, Internal Revenue Service Center Kansas City, MO 64999.
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