A fair amount of taxpayers are familiar with at least the basics behind gifts and taxes, but it’s important to understand your obligations when making taxable gifts to others to ensure your compliance with the Internal Revenue Code.
If you make a taxable gift to someone else, a gift tax return needs to be filed. If you fail to do this, penalties may apply. If you don’t file the gift tax return as you should, you could be responsible for the amount of gift tax due as well as 5% of the amount of that gift for every month that the return is past due. If you fail to pay the penalty, you could be responsible for the amount of the gift tax due and .5% of the amount of the gift for every month after the due date.
Sending in your gift tax return is important for practitioners, too. Failing to do this could result in criminal charges or even referral to the IRS Office of Professional Responsibility under the umbrella of a Circular 230 violation. Bear in mind that although this filing requirement does relate to taxable gifts, even those under the annual exclusion amount, should be listed on a report. Those who fall under the annual exclusion, however, are unlikely to face a penalty as these penalties only relate to the amount of tax due.
If you’ve got more questions about your obligations for reporting with regard to gifts, contact our office to learn more about the process and how gifting can impact your overall tax situation. You can set up a meeting by emailing email@example.com.
At the end of March, Governor Cuomo approved changes to New York’s estate and gift tax laws while also making amendments to income tax rules. One of the most important changes was in relation to the estate tax exclusion amount. The amount that an individual can pass without being hit by the New York estate tax, which was previously $1 million, has now been increased based on the follow specifications:
- For those individuals who pass away between April 1, 2014 and April 1, 2015, the exclusion amount is increased to $2,062,500
- For those individuals who pass away between April 1, 2015 and April 1, 2016, the exclusion amount is increased to $3,125,000.
- For those individuals who pass away between April 2, 2016 and April 1, 2017, the exclusion amount is $4,187,500
- For those individuals who pass away between April 1, 2017 and January 1, 2019, the exclusion amount is $5,250,000.
Starting in 2019, the exclusion amount will be indexed for inflation purposes. Presently, the New York estate tax will stay at 16 percent. It’s also worth knowing that there’s an estate tax cliff for those with taxable estates between 100 percent and 105 percent of the state exclusion amount. There’s never been a better time to meet with an estate planning specialist to ensure that you are maximizing protection of your assets. Since estate planning and tax rules are complex and constantly changing, an annual review is recommended so that your documents and plans are fully up to date. To capitalize on your assets with a comprehensive estate plan, contact us at 732-521-9455 or email us at firstname.lastname@example.org