Can a late gift tax return for previous years be filed, without penalty, when no gift tax is owed?

[Anonymous]

Each of the two gift tax returns is well below the LIFETIME exclusion at the time each gift was made (estimated combined exclusion would be under $800,000).  No skip persons involved.  They both would be simple returns of gifted real estate.

[tagteam · Accepted solution]

There is technically no actual dollar penalty for filing a gift tax return late unless gift tax is due (although leave it to the IRS to try to assess something).

However, filing a return starts the running of the 3-year time period for the IRS to challenge the valuation(s) reported on the return (if you never file the statute never begins to run). Also, although probably irrelevant here, you lose the ability to allocate the GST exemption on a late file gift tax return based on its value on the date of the transfer.

[Anonymous]

In the case of a failure to file a return of tax imposed by chapter 1 within 60 days of the date prescribed for filing of such return (determined with regard to any extensions of time for filing), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, the addition to tax under paragraph (1) shall not be less than the lesser of $205 or 100 percent of the amount required to be shown as tax on such return

[tagteam]

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@Anonymous wrote:

(1) shall not be less than the lesser of $205 or 100 percent of the amount required to be shown as tax on such return

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Yes, according to Section 6651 it is the lesser of $205 and 100% of the amount required to be shown as tax on the return. So, in this case, the lesser of $205 or 100% of $0 would be $0 - or am I missing something?

[Anonymous]

I assure both of you (HACKITOFF & tagteam) this is not a tax trivia question (Ha! Ha!). Even if I have to pay $205 for failure to file Form 709 by the following April 15 of the date of gift, is that ALL I would be penalized? Of course, I would prefer to pay nothing, zero. Again, no gift tax would be owed. The gift (FMV approx. $450,000.00) is well below $5,000.000.00 lifetime exemption for 2011. Thanks!

[tagteam]

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@Anonymous wrote:

Again, no gift tax would be owed. The gift (FMV approx. $450,000.00) is well below $5,000.000.00 lifetime exemption for 2011. Thanks!

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Then you would pay nothing. This is not at all unlike a scenario where a refund is due on an income tax return (or no tax is due); penalties basically apply when tax is due and owing but is not paid and/or no return is filed (or the return is filed late).

[eyeballjames]

So did you end up filing late gift tax return? If yes, then how did you do it? Do you simply use the current 2019 form 709 and put the older dates on schedule A? 

[tagteam]

@eyeballjames There is no penalty for late filing a gift tax return (Form 709) if no tax is due. 

The reference to a "minimum penalty" for failure to file applies to income tax returns (Section 61), not gift tax returns, which are addressed in Section 2501.

[eyeballjames]

Thank you for replying. 

So I could use the current 2019 form 709 for both 2018 and 2018 gifts? 

[kuoman]

Did you end up using previous year 709 fo

[kuoman]

Did you end up using 709 form from the year the gift was given or the year you are filing?

[tagteam]

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@kuoman wrote:

Did you end up using 709 form from the year the gift was given or the year you are filing?

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You should use the 709 form for the year in which the gift was made (i.e., use the 2018 form for gifts made during the 2018 tax year).

[CrossEyed]

I made a gift in 2018 and failed to file form 709. I also made gift in 2019 and need to report that.

Is it best I file these separately with the corresponding 2018 and 2019 forms? Or can I consolidate and include everything from both years on the 2019 form?

If I have to file on separate forms, do I "pretend" I had "previously filed" when I answer question 11a "Have you previously filed a Form 709?" I assume yes, so that my lifetime exemption total would have the right running total. Any help is appreciated!!

[tagteam]

@CrossEyed No, you cannot consolidate the forms and, yes, your assumption is correct.

[delooox]

You know your stuff!  Wondering if you can help me here:  I gave a gift to my sister's Special Needs Trust, of which I am trustee. I am pretty sure I am required to file even if it was less than $15,000 (which it is not) and even if I owe no tax at this point in our estate value. 

Do you know if I need to attach a copy of the trust document when I file the 709? Seems like there may be documents required, but not sure if I just have to keep the records.

Thanks for all the info.