Form 709 - superfunding 529 and gift tax

[jschoomer]

Wife and I contributed total of $63,000 to our son’s Virginia 529 plan in 2024 so we need to file 709. Wasn’t aware that it also had to be done before 15th April. So from what I understand, I can superfund the 529 plan, and not have the excess amount count towards the lifetime estate limit.

My wife contributed $32,000 from our joint bank account to a 529 account she owns (beneficiary is our son), and I contributed $31,000 from our joint bank account to a 529 account I own (beneficiary is our son). Question:

1. Do we file separate Form 709 claiming $13,000 in my form and $14,000 in her form?
2. What is the answer to line 19 question “Did you and your spouse make gifts to third parties?” If it’s “Yes”, then do we consent to gift splitting and send both our forms in the same envelope?
3. Is there a penalty for filing Form 709 late even if we don’t have to pay any gift taxes?
4. Can we superfund the 529 again in 2025… …having done it in 2024? If yes, then, I can contribute to $25,000 and she can contribute to $24,000 without incurring any gift taxes, correct?

Thanks!

[Hi Palms]

1. Yes, you each file a separate 709.

2. You split gifts with your spouse so each can take advantage of your entitlement to the lifetime exemption. Mail both forms in the same envelope.

3. No penalty.

4.  Yes, you can fund it again in 2025 and, of course, will file 709s for this year.

[jschoomer]

Thanks for your reply. I have a follow-up to your answer for question #3: What is the answer to line 19 question “Did you and your spouse make gifts to third parties?” If it’s “Yes”, then do we consent to gift splitting and send both our forms in the same envelope?

Your answer is that I should be "gift-splitting". Is it because the money was contributed from a joint account? I can still answer "Yes" to the line 19 question and in Part III, line 1 say No to "wanting to have that excess be considered as made one-half by each of us". We can still file individual 709s and send in separate envelopes. Can you please explain the advantage here of "gift-splitting" I would prefer not to go through the whole attaching a Notice of Consent with the two forms - previously spouse could just sign, but starting 2024, you need to attach that document.

[Hi Palms]

You're correct in the sense that gift splitting is not necessary to the extent that the gifts were from your joint account and, therefore, one-half is considered to be from each of you.

[PSG2020]

I read the IRS instructions for form 709 (for 2025). If you have contributed above 19000 (single) or 38000 (couple), you can split the amount over 5 years. Instructions for Form 709 (2025) | Internal Revenue Service

Line B. Qualified Tuition Programs (529 Plans or Programs)
If in 2025, you contributed more than $19,000 to a qualified tuition plan (QTP) on behalf of any one person, you may elect to treat up to $95,000 of the contribution for that person as if you had made it ratably over a 5-year period. The election allows you to apply the annual exclusion to a portion of the contribution in each of the 5 years, beginning in 2025. You can make this election for as many separate people as you made QTP contributions.

You can only apply the election to a maximum of $95,000. You must report all of your 2025 QTP contributions for any single person that exceed $95,000 (in addition to any other gifts you made to that person). For each of the 5 years, you report one-fifth (20%) of the amount for which you made the election in Part 1 of Schedule A for gifts to non-skip persons and in Part 2 of Schedule A for gifts to skip persons.

In column (f) of Part 2 (Schedule A), list the date of the gift as the calendar year for which you are deemed to have made the gift (that is, the year of the current Form 709 you are filing). Do not list the actual year of contribution for subsequent years.

However, if in any of the last 4 years of the election, you did not make any other gifts that would require you to file a Form 709, you do not need to file Form 709 to report that year’s portion of the election amount.

Example.
 
In 2025, Pat contributed $100,000 to a QTP for the benefit of Max (a non-skip person for GST tax purposes). Pat elects to treat $95,000 of this contribution as having been made ratably over a 5-year period. Accordingly, for 2025, Pat reports the following.

$5,000
(the amount of the contribution that exceeded $95,000)
+ $19,000
(the 1/5 portion from the election)

$24,000
the total gift to A listed in Part 1 of Schedule A for 2025

In 2026, Pat gives a gift of $20,000 cash to Alex (a non-skip person for GST tax purposes) and no other gifts. On Pat’s Form 709, Pat reports in Part 1 of Schedule A the $20,000 gift to Alex and an $19,000 gift to Max (the one-fifth portion of the 2025 gift that is treated as made in 2026). In column (f) of Part 1 (Schedule A), Pat lists “2026” as the date of the gift.

Pat makes no gifts in 2027, 2028, or 2029. Pat is not required to file Form 709 in any of those years to report the one-fifth portion of the QTP gift because Pat is not otherwise required to file Form 709.

You make the election by checking the box on line B at the top of Schedule A. The election must be made for the calendar year in which the contribution is made. Also attach an explanation that includes the following.

The total amount contributed per individual beneficiary.

The amount for which the election is being made.

The name of the individual for whom the contribution was made.

If you are electing gift splitting, apply the gift-splitting rules before applying the QTP rules. Each spouse would then decide individually whether to make this QTP election.

Caution:

 
Contributions to QTPs do not qualify for the education exclusion.