Author Topic: Tax Filings for Gifts - HELP!  (Read 2854 times)

ProfWinkie

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Tax Filings for Gifts - HELP!
« on: July 30, 2014, 09:05:24 AM »
My CPA just told me that I need to file a IRS form 709 every year I make a gift into my nephew's 529 or UTMA and that even parents and grandparents must do so of gift taxes will apply.

Is he crazy or is this true?

matchewed

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Re: Tax Filings for Gifts - HELP!
« Reply #1 on: July 30, 2014, 09:30:50 AM »
Quote
Q. What are the gift tax advantages of an account?
A. Normally, a gift of more than $14,000 to a single person in one year is subject to federal gift tax. With the Program, an individual can potentially contribute up to $70,000 (and married couples can potentially contribute up to a total of $140,000) to an Account for a particular Designated Beneficiary in one year without triggering the tax. To do this the contributor must elect to treat the entire gift as a series of five equal annual gifts. The five-year prorating is elected by filing a gift tax return for the year in which the gift is made. If the Donor dies before the start of the fifth year, a portion of the contribution must be added back to the Donor's estate for tax purposes. You should consult with a tax advisor regarding the gift and estate tax consequences of contributing to (or making any other transaction with respect to) an account.

From http://www.collegeaccess529.com/Pages/CommonQuestionsAbout529Plans.aspx#10

and -

Quote
Q. Are there contribution limits?

A. Yes. Contributions can not exceed the amount necessary to provide for the qualified education expenses of the beneficiary. If you contribute to a 529 plan, however, be aware that there may be gift tax consequences if your contributions, plus any other gifts, to a particular beneficiary exceed $14,000 during the year. For information on a special rule that applies to contributions to 529 plans, see the instructions for Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return

From http://www.irs.gov/uac/529-Plans:-Questions-and-Answers

ProfWinkie

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Re: Tax Filings for Gifts - HELP!
« Reply #2 on: July 30, 2014, 10:21:32 AM »
Thanks but the links do not address the question regrading filing a 709

matchewed

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Re: Tax Filings for Gifts - HELP!
« Reply #3 on: July 30, 2014, 10:28:24 AM »
Thanks but the links do not address the question regrading filing a 709

Quote
Q. What are the gift tax advantages of an account?
A. Normally, a gift of more than $14,000 to a single person in one year is subject to federal gift tax. With the Program, an individual can potentially contribute up to $70,000 (and married couples can potentially contribute up to a total of $140,000) to an Account for a particular Designated Beneficiary in one year without triggering the tax. To do this the contributor must elect to treat the entire gift as a series of five equal annual gifts. The five-year prorating is elected by filing a gift tax return for the year in which the gift is made. If the Donor dies before the start of the fifth year, a portion of the contribution must be added back to the Donor's estate for tax purposes. You should consult with a tax advisor regarding the gift and estate tax consequences of contributing to (or making any other transaction with respect to) an account.

From http://www.collegeaccess529.com/Pages/CommonQuestionsAbout529Plans.aspx#10

and -

Quote
Q. Are there contribution limits?

A. Yes. Contributions can not exceed the amount necessary to provide for the qualified education expenses of the beneficiary. If you contribute to a 529 plan, however, be aware that there may be gift tax consequences if your contributions, plus any other gifts, to a particular beneficiary exceed $14,000 during the year. For information on a special rule that applies to contributions to 529 plans, see the instructions for Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return

From http://www.irs.gov/uac/529-Plans:-Questions-and-Answers

As in see form 709. Just go look at the thing and find out what it says.

ProfWinkie

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Re: Tax Filings for Gifts - HELP!
« Reply #4 on: July 30, 2014, 10:36:39 AM »
OK thanks

Cpa Cat

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Re: Tax Filings for Gifts - HELP!
« Reply #5 on: July 30, 2014, 10:37:46 AM »
My CPA just told me that I need to file a IRS form 709 every year I make a gift into my nephew's 529 or UTMA and that even parents and grandparents must do so of gift taxes will apply.

Is he crazy or is this true?

Your question isn't exactly clear.

Are you asking "OR gift taxes will apply" or "IF gift taxes will apply"?

While it never hurts to do research and educate yourself, I strongly suggest you take the advice of your CPA over random people on the internet when it comes to gift tax returns. If your CPA is suggesting that you cover your ass with a gift tax return, then you should probably cover your ass with a gift tax return. He knows more about your gifting situation than we do.

When it comes to gift tax returns, if he's right and you do not follow his advice, not filing a gift tax return can have serious consequences. If he's wrong and you do follow his advice, then the worst that happens to you is that you filed an unnecessary gift tax return.

To be honest, even if you provided every detail here, I would not personally want to offer advice to you about gift taxes. It's an area of tax law that is fraught with liability and complications. If you want a real second opinion, then hire a second CPA.

Joel

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Re: Tax Filings for Gifts - HELP!
« Reply #6 on: July 30, 2014, 10:43:24 AM »
How much did you gift these individuals throughout the year?

You can gift up to $14k per individual without being subject to the gift tax. Once you gift over that amount in a given year, you must file the Form 709. Even then though, you can apply that amount to your lifetime gift exemption, which is up to $5.34 million in your lifetime.