Getting a gift can be a real relief, especially in financially trying situations. But whether that gift is a chunk of change, a piece of property or anything else of value, it’s possible that there might be some taxes that need to be paid on it. So it’s important to talk about what happens if you fail to file a tax gift return.
But before we start, it’s important to note that I am not a tax expert, financial and tax advice should always be obtained from a licenced finance professional.
What is a Gift Tax Return?
A gift tax return is triggered when you give a gift of $15,000 or more to one person. It’s a form that has to be filed with your yearly taxes. However, some gifts like that given to assist with tuition and medical bills are exempt from this.
The gift tax return must be filed by the person giving the gift unless special arrangements have been made. However, a married couple might be able to double that amount before the gift tax return needs to be filed.
What Happens If You Fail To File a Gift Tax Return?
It’s ill advised to not file tax forms that are required of you, and that includes the gift tax return. If you fail to file a gift tax return when you have to, you could be at risk of having penalties imposed upon you by the IRS.
Never assume that a gift tax return isn’t required because a particular gift isn’t taxable. You should always consult an estate planner or finance professional to double-check when you should be filing these returns.
How Does The IRS Know About a Gift?
It might seems strange that the IRS would know that you failed to file a gift tax return on something that you gifted, but they’re well aware that not everyone files the proper paperwork when they’re supposed to.
The IRS commonly audits estates looking for gifts that should have had a gift tax return filed with annual taxes. They can also do public records searches for things like property and other big ticket items. If something’s been given to you, chances are there’s a paper trail that the IRS can sift through to find non-paying individuals.
Even if you aren’t caught until after you’ve passed away, don’t think that they won’t rectify the situation. The IRS will not only file a penalty against your estate, but they will likely impose accrued interest on that penalty from when it should have been filed. It can be a pretty hefty situation.
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