When Must Form 709 Gift Tax Return Be Filed and Who Must File One?

How to Determine If You Should File a Gift Tax Return, IRS Form 709

Cropped Image Of Hands Holding Gift Box Against Wooden Fence
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One of the most misunderstood taxes is by far the federal gift tax. It applies to transfers of property from one person to another where the recipient doesn't pay fair market value for the property, or in the case of gifts of cash when the recipient doesn't give anything of value in return for the cash. In other words, it's not a "fair" exchange—the recipient comes out ahead in the transaction with the giver receiving very little if anything in return.

And yes, the Internal Revenue Service taxes these exchanges. Why? Mostly because some large estates are taxed on their value when someone dies and leaves his cash and property to beneficiaries. Were the decedent able to give his largess away tax-free during his lifetime, there might be nothing left for the federal government to tax at his death. Whenever money changes hands, the IRS tends to have its own out in expectation of a share.

And here's another interesting wrinkle: The recipient of a gift is not liable for the tax, just as beneficiaries aren't liable for paying income tax on cash or the value of property received when someone dies. The giver is responsible for paying the gift tax. 

If you make one or more transfers of cash or property to anyone during the course of the tax year, you might have to file IRS Form 709, the Gift and Generation-Skipping Transfer tax return, and pay the gift tax.

But there are some exceptions. 

The Annual Exclusion 

You must file Form 709 if the total value of all gifts you make to a single person within the same calendar year exceeds $14,000. Gifts that don't exceed $14,000 per year to the same person qualify for the annual exclusion from gift taxes. 

So if you give your son $10,000 to buy a car and another $10,000 to pay off his credit card debt, you're actually made a taxable gift to him in the amount of $6,000—$20,000 less the $14,000 exclusion.

You're required to file IRS Form 709 even though your son won't incur any income tax or gift tax consequences.

The annual exclusion from gift taxes was indexed for inflation beginning in 1997 and it can only be increased in $1,000 increments. This means it can go up each year, but not by more than $1,000. As a practical matter, however, that hasn't happened recently. The annual gift tax exclusion for 2009, 2010, 2011, and 2012 was $13,000. It increased to $14,000 for the first time in 2013 and it's still at $14,000 as of 2017.

Spouses Can "Split" Gifts 

If you or your spouse gives one or more gifts to the same person that exceed $14,000 in value in the same calendar year, you can agree to "split" the gifts between the two of you.

If your spouse gives his son $10,000 to buy a car and another $10,000 to pay off his credit card debt, he has two options even if the entire $20,000 came from an account in his sole name. He can file Form 709 and report $6,000 in taxable gifts to his son, or he can file Form 709 and report that the two of you have elected to divide the gifts between you. In this case, each of you is deemed to have made a $10,000 gift to the son, each coming in under the $14,000 annual exclusion limit so no tax would be due.

Gift-splitting in this manner is referred to as a "legal fiction." Although your spouse is the only one who really made the gifts, the Internal Revenue Code allows you to effectively say "No, the gifts really came from both of us." The end result is that no taxable gifts were made. Gift-splitting is a total figment of the Internal Revenue Code, but it's a perfectly legal and legitimate gift tax position.

Gifts to Spouses Who Are Not U.S. Citizens

Gifts made from a spouse who is a U.S. citizen to a spouse who is not a U.S. citizen are only taxable when they exceed $149,000. Unlike the unlimited marital deduction for gifts made to spouses who are U.S. citizens, gifts made to spouses who are not citizens are limited. The specific limits for gifts to non-citizen spouses from 2009 through 2017 are:

  • 2009     $133,000
  • 2010     $134,000
  • 2011     $136,000
  • 2012     $139,000
  • 2013     $143,000
  • 2014     $145,000
  • 2015     $147,000
  • 2016     $148,000
  • 2017     $149,000

When Is IRS Form 709 Due?

IRS Form 709 is due on or before April 15 of the year following the year when you made taxable gifts. 

If you find that you have to file IRS Form 4868 to request an automatic six-month extension of time to file your personal income tax return, this form also extends the time to file IRS Form 709. But it doesn't extend the time to pay any gift tax that you might owe. That's still due on April 15. 

If you don't have to extend the time to file your personal return, you can file IRS Form 8892 to receive an automatic six-month extension of time to file IRS Form 709. But again, filing Form 8892 does not extend the time to pay any gift tax you might owe. You must pay the tax you owe when the form is filed or interest and penalties will accrue.

If you're not sure if gifts you've made during the course of the year should be reported to the IRS on Form 709, consult with an estate planning attorney and/or an accountant well before the April 15 deadline to find out.