The Forbes website is running an article that is interesting to people in the field of estate planning. It turns out that the Internal Revenue Service is expected to process a much higher volume of gift tax forms this year.
If you give taxable or potentially taxable gifts during a given year you must file IRS Form 709. This is true even if you don’t owe any tax yet because your overall giving falls below the lifetime unified gift/estate tax exclusion of $5.25 million.
Those who need more time to file can request an automatic six-month extension by filing IRS Form 8892. If you are filing Form 4868 to request an extension for your total personal income tax return you will automatically get an extension for filing Form 709.
Why would there be a higher volume of gift tax returns this year? In 2011 the estate tax exclusion was set at $5 million with an adjustment for inflation in 2012. This adjustment brought the exclusion up to $5.12 million last year.
We heard a lot of talk about the “fiscal cliff” toward the end of the year. This involved automatic tax increases and spending cuts.
One of the increases would have been a reduction in the amount of the estate tax exclusion to $1 million, which would have exposed many more Americans to the tax.
Because it was entirely possible that this $1 million exclusion could have been implemented many individuals decided to give large gifts in 2012 while the exclusion was still $5.12 million. Ultimately, this turned out to be unnecessary.
The base $5 million exclusion remained in place after the passage of the American Taxpayer Relief Act of 2012. Another adjustment for inflation has resulted in a $5.25 million exclusion in 2013.
- Three Tips to Provide Inheritance Planning Insight - June 11, 2021
- Veterans Pension Can Defray Long-Term Care Costs - June 7, 2021
- How Can a Special Needs Trust Trustee Use the Funds? - June 3, 2021