Gave a substantial monetary gift to family member early in 2011 ( approx $ 128, 000), forgot to report it when filing this year. I let my accountant know and she is handling it right now but she was upset and i'm wondering how grievous an error this was. thanks
State/Country relating to question: Pennsylvania
Gave this info to my accountant today; she was upset , said she would refile. I'm so worried, I'm older and I simply forgot it at tax time. Just wondering how much trouble I made for myself; I'm so conscientious and want to do the right thing.
Hi and welcome to Just Answer!
Based on the value of the gift - you likely should file a Gift Tax return.
As a recipient of a gift - the person does not need to claim it as income. Regardless of the value. Please see for reference IRS publication 525 page 34 (left column)- http://www.irs.gov/pub/irs-pdf/p525.pdf
Gifts and inheritances. Generally, property you receive as a gift, bequest, or inheritance is not included in your income. However, if property you receive this way later produces income such as interest, dividends, or rents, that income is taxable to you. If property is given to a trust and the income from it is paid, credited, or distributed to you, that income is also taxable to you. If the gift, bequest, or inheritance is the income from the property, that income is taxable to you.
The donor (the person who makes a gift) who is an US citizen may be required to file a gift tax return if the value of the gift is above $13,000 per person per year.
If the value of the gift is less than $13,000 per person per year - there is no tax consequences for the donor.
That would be the donor who files form 706 - not recipients of the gift.
Refer to Form 709 , 709 Instructions.There will not be any gift taxes unless the lifetime limit of $5,000,000 (adjusted every year for inflation) is reached.
Section 6651 imposes penalties for both late filing and late payment, unless there is reasonable cause for the delay. Penalties are based on the amount of gift tax due.
There are also penalties for willful failure to file a return on time, willful attempt to evade or defeat payment of tax, and valuation understatements that cause an underpayment of the tax.
So far - if you do not have any gift Tax Liability and that was not a willful failure to file a return on time - there should not be any penalty.
Let me know if you need any help.
Thank you, XXXXX XXXXX think they might recognize it as an honest mistake and let me just pay the tax?
Based on your information - it sounds as a honest mistake.
As long as you did not reach $5,000,000 lifetime gift limit - there is no gift tax due. If that is correct - there should not be any penalties.
Be sure to ask for clarification if needed.
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