If you’ve been operating under the impression that gifting a close friend or relative with, say, $15,000 constitutes a kind and generous act, you’re right. But it’s also an act that can be far more costly than what you’re aware. Why? Depending on the circumstances, you can be held liable for a gift tax, courtesy of Uncle Sam.
A gift tax is exactly what it sounds like: a tax you incur based on the value of the gift you give to someone. In general, a gift is considered anything you transfer, either directly or indirectly, to someone else without receiving payment in full in return. For example, the widow matriarch of a closely held family business wants to minimize her estate tax upon her death, so she decides to gift to her children some of her interest in the business during her lifetime.
The factors affecting if, or how, your gifts are taxed tend to vary from year to year – for example, your marital status, the amount of the annual exclusion, or limitations and restrictions placed on payments. Gifting issues can also crop up in trusts and other transfer documents.
Gift tax returns can grow into pretty complicated affairs. So if you’re uncertain about your IRS obligations in that arena, or if your gift tax return has been tagged for an audit, your best bet is to consult a tax attorney who can advise you of the optimal solutions for the problem.
As a tax boutique, Law Offices of Christy Lee, P.C., offers you assistance at all levels concerning gift taxes. We can help you plan for gifting long-term so that minimal or no gift taxes are incurred, and we can prepare your gift tax returns when necessary. If you do receive an IRS letter notifying you that your gift tax return is being audited, we can intercede on your behalf inorder to maximize your chances for a favorable resolution. We will also appear on your behalf at any relevant hearings and fight hard to ensure your rights.
So if you’re one of those on the receiving end of a “gift letter” from the IRS, give a tax attorney at Law Offices of Christy Lee, P.C., a call to find out all the available options to minimize taxes, penalties, and interest while increasing your chances for an outcome most beneficial to you.