You said: To prepare for the worst case, assuming that, I did the gifting this year (but the amount was below unified lifetime credit), then a couple of years later, IRS catches my case and judges that I was actually a resident (not a NRA) when I did the gifting. If this happens, I will be forced to file gift tax return and pay gift tax by then. In this case, because I can still claim to count this gift towards my unified lifetime credit and by doing so, I should not owe any gift tax to IRS anyways, right? Just wonder, is there still any late filing penalty for this not-owing-any-tax case? If so, how to calculate it?
First, the facts and circumstances test to determine residency. based on the information you provided, not being domiciled in the US at all, and
any gift NOT coming from a US situs account AND
the gifts being intangibles but not cash, it is my opinion that you will not be subject to filing a form 709.
And you are right, there is nothing owed UNTIL the cumulative LIFETIME TAXABLE (gifts under $14,000 per person per year are not taxable at all) gift amount crosses over that annually increasing threshhold ($5,250,000 if you passed this year).
And here's the real "punch-line!" The late filing penalty IF you were deemed to be domiciled in UIS for some reason is based on AMOUNT OWED. There is no dollar amount. It is expressed as a percentage of amount owed, which for you is ZERO.
See this from the IRS internal manual:
Failure to File, IRC 6651(a)(1)
If a return is not timely filed, IRC 6651(a)(1) provides for a penalty of 5% if the failure is for not more than one month, with an additional 5% for each month or fraction thereof during which the failure continues, but not in excess of 25%.
The failure to file (FTF) penalty under IRC 6651(a)(1) applies to any delinquent return or substitute for return, except when the failure to file was due to reasonable cause and not willful neglect.
The FTF penalty is computed on the net amount due. The net amount due is the tax liability required to be shown on the return reduced by payments of tax on or before the date prescribed for payment and by the amount of allowable credits against the tax, which may be claimed on the return.
You said: For the hypothetical case above, when I claim to use the unified lifetime credit, I am actually claiming based on the credit amount in the year I did gifting rather than in the year I am filing the return (which could be a couple of years later than the year I did gifting), right?
Really, both. The credit is a LIFETIME, cumulative amount. If your total gifts (over 14,000 per person per year) have finally accumulated to more than the lifetime credit. THAT is when tax is owed. You could say it this way: the TEST to see if you have crossed over is run every year, but you only owe the tax in the year you cross over that increasing threshhold.
(and remember the late filing penalty is really designed for those that OWE, because it's a percentage of the tax owed)
- To prevent the worst case from happening, do you think it is OK to still file form 709 to notify IRS about this gifting regardless, even though I think I am still a NRA this year? So that I fulfill (actually over-fulfill) my responsibility. But if I do so, does it mean that IRS will just consider me as a resident alien and count this amount into my unified lifetime credit and there is no way for me to argue that "this should not be counted because I was a NRA when gifting" in the future anymore?
No, based on the information - especially given that you do not even know if you will be domiciled here in the future, you should not file, in my opinion. If you file when you are not required, the system won't know what to do with your return ... except possibly add gifts to your accumulated total when (again, based on your not being here, the gifts being intangible assets AND being sent from a bank that is non-US situs), you are not required to file.