The amount of gift tax you can owe is directly related to the value of the property or the amount of cash you donate. When you use TurboTax to prepare your tax return, we'll fill out all the right forms for you and guide you through the exemptions, deductions and credits you qualify for. The most important question is whether you need to file a gift tax return, which tells the IRS about large donations that count toward your lifetime exemption. Finally, individuals who make donations as part of their overall estate and financial plan often enlist the services of lawyers and CPAs, EAs and other professionals.
Form 4506-T has several uses and special care should be taken when filling out the form for a gift tax inquiry. The IRS will provide a copy of a gift tax return when Form 4506, Request for Copy of Tax Return, has been completed correctly and filed with justification and payment. If the donor is in a position to owe gift taxes, they will not require you to pay the tax in conjunction with receiving the gift. However, if you know that you are doing what could be counted as a large donation, such as extending an interest-free loan or giving money to someone now that they will later use it for college, but haven't spent it yet, be sure to find out if this will require you to at least file a gift tax return.
The gift tax imposes a tax on large donations, which prevents large transfers of wealth without any tax implications. The bad news is that you'll need to file a gift tax return, but the good news is that you probably won't pay gift tax. It is the giver, not the recipient, who files a gift tax return (Form 70) and could pay gift tax. Go above and you'll need to fill out a gift tax form when you file returns, but you could still avoid having to pay any gift taxes.
The amount of the gift that exceeds the annual limit each year only reduces the amount of the lifetime exemption. Federal gift tax may apply when someone makes a large gift of cash or any other type of property to another person and receives nothing in return. If you eventually exhaust your lifetime exclusion and have to pay gift taxes, the fee you'll pay will depend on the value of the taxable gifts. However, due to the generous exclusions and deductions available, the average taxpayer never files a gift tax return or pays gift taxes.
