The Internal Revenue Service (IRS) Form 709 is used to report gifts and transfers subject to the federal gift tax and some generation-skipping transfer taxes. The following is a description of how to file IRS Form 709.
When the Form Is Required and Who Needs to File
Technically, whenever a person gives a gift to another person, such as a birthday gift, the rules of gift taxes must be followed. If the person giving the gift is a U.S. citizen, he or she must file Form 709 if the gifts given total $14,000, or more, as of 2016. This does not apply if the gifts are given to a spouse. This also does not apply for gifts given to charities and deducted as such.
Three types of transfers are not subject to the gift tax and do not require Form 709. These are transfers to political institutions, payments that qualify for the education exclusion and payments that qualify for the medical exclusion.
Spouses are not allowed to file a joint Form 709. Each individual required to file Form 709 must file his or her own. Nonresident noncitizens may also be required to file Form 709 under certain circumstances. There are other details regarding who must file, but the above are the general cases. Full details are available on the IRS website. Also, the donor of the gift is responsible for paying the tax, not the receiver of the gift.
How to File Form 709
There are 10 basic steps required for filling out Form 709. It is highly recommended to go on the IRS website for the latest up-to-date details on each of these steps.
Step One: Determine if filing Form 709 is required. The above statements provide a good idea if the form should be filed, but confirm that on the IRS website.
Step Two: Determine what gifts need to be reported on Form 709 if filing is necessary.
Step Three: If the person giving the gifts has a spouse, determine if the two people would prefer to split the gifts and filing requirements. It is best to seek out a tax professional or Certified Public Accountant (CPA) for the answer to this question.
Step Four: Complete the general information part of the form, which is located in part one.
Step Five: Detail the gifts line by line on Schedule A “Computation of Taxable Gifts” for parts one, two and three of the form.
Step Six: If applicable, complete Schedule B “Gifts from Prior Periods,” Schedule C “Deceased Spousal Unused Exclusion Amount” and Schedule D “Computation of Generation-Skipping Transfer Tax.”
Step Seven: If the gift is listed on part two or three of Schedule A, complete Schedule D.
Step Eight: Complete Schedule A, part four, “Taxable Gift Reconciliation.”
Step Nine: Complete part two of the first page of Form 709, “Tax Computation.”
Step 10: Sign and date the form.