Gift tax return necessary ?

[RWG1950]

I have an very elderly customer with a couple million dollars, so apparently no estate tax considerations when she passes. (for her state either)
When helping her organize her upcoming tax deductions, I normally go through her check register & credit card statements at year end.
She has 3 children & I note that this year she has written checks to her kids during the year in amounts that total above the $15K gift threshold for each.
I'm aware that a 2019 gift tax return is supposed to be filed, but was wondering what consequences could occur for not filing one ?
Thanks for comments.

[New York Enrolled Agent]

I'm aware that a 2019 gift tax return is supposed to be filed, but was wondering what consequences could occur for not filing one ?
Thanks for comments.

§6019 requires a gift tax return to be filed when gifts are made in excess of the annual exclusion.

That's the only comment that a tax professional should need.

[TAXNJ]

In addition to above reference you can also refer to TTB 21-27 “Taxable Gifts”

[spanel]

I have an very elderly customer with a couple million dollars, so apparently no estate tax considerations when she passes. (for her state either)
When helping her organize her upcoming tax deductions, I normally go through her check register & credit card statements at year end.
She has 3 children & I note that this year she has written checks to her kids during the year in amounts that total above the $15K gift threshold for each.
I'm aware that a 2019 gift tax return is supposed to be filed, but was wondering what consequences could occur for not filing one ?
Thanks for comments.

You fire her would be the consequence.

Chris

[Scarecrow]

The question was about the consequences for not filing a gift tax return. Since I don't do Gift or Estate returns, I feel no obligation to fire the client for not going to an estate attorney and having a tax preparer who specializes in Estate and Gift tax returns file the necessary returns. I do feel an obligation to inform the client of his or her responsibilities in seeking the services of a professional, but it is not my job to be the Estate and Gift tax police. Firing the client for not filing the gift tax return would be like firing a client for speeding down the highway. It is none of your business if a client breaks a law in which you have no obligation in enforcing, provided you informed the client of his or her filing obligations.

So to answer the original question, a gift tax return with no tax due is considered an information return, subject to IRC section 6721. Maximum penalty is $550 per information return filed late.

[TAXNJ]

The question was about the consequences for not filing a gift tax return. Since I don't do Gift or Estate returns, I feel no obligation to fire the client for not going to an estate attorney and having a tax preparer who specializes in Estate and Gift tax returns file the necessary returns. I do feel an obligation to inform the client of his or her responsibilities in seeking the services of a professional, but it is not my job to be the Estate and Gift tax police. Firing the client for not filing the gift tax return would be like firing a client for speeding down the highway. It is none of your business if a client breaks a law in which you have no obligation in enforcing, provided you informed the client of his or her filing obligations.

So to answer the original question, a gift tax return with no tax due is considered an information return, subject to IRC section 6721. Maximum penalty is $550 per information return filed late.

A very professional reply.

[New York Enrolled Agent]

A very professional reply.

Unfortunately, it may not be correct.

So to answer the original question, a gift tax return with no tax due is considered an information return, subject to IRC section 6721. Maximum penalty is $550 per information return filed late.

How did you determine that a gift tax return is an information return for purposes of §6721?

§6721 is found in Chapter 68, Subchapter B, Part II of the Internal Revenue Code. §6724(d)(1) defines information return for purposes of this part (i.e. Part II). I do not see any reference to §6019. If I missed it somewhere, I'd appreciate you pointing it out.

[Scarecrow]

Unfortunately, it may not be correct.

So to answer the original question, a gift tax return with no tax due is considered an information return, subject to IRC section 6721. Maximum penalty is $550 per information return filed late.

How did you determine that a gift tax return is an information return for purposes of §6721?

§6721 is found in Chapter 68, Subchapter B, Part II of the Internal Revenue Code. §6724(d)(1) defines information return for purposes of this part (i.e. Part II). I do not see any reference to §6019. If I missed it somewhere, I'd appreciate you pointing it out.

IRC section 6019, the code section that requires the filing of a gift tax return, is in Chapter 61, Information and returns. Unless specific code section applies, such as a failure to file a Partnership return, information returns all fall under the penalty provisions of IRC section 6721 and 6722. Unless you happen to know of one, I do not see where Gift tax returns have a specific code section that has a specific penalty provision that applies.

[TaxGuyBill]

The IRM states that the penalty for Gift Tax returns falls under §6651 (the same as regular income tax returns). That would mean if there is no tax due, there isn't a penalty.

https://www.irs.gov/irm/part20/irm_20-001-011r#idm140319035693264

https://www.law.cornell.edu/uscode/text/26/6651

[Scarecrow]

The IRM states that the penalty for Gift Tax returns falls under §6651 (the same as regular income tax returns). That would mean if there is no tax due, there isn't a penalty.

https://www.irs.gov/irm/part20/irm_20-001-011r#idm140319035693264

https://www.law.cornell.edu/uscode/text/26/6651

I think I agree. No gift tax, no penalty. As NY EA points out, the information return penalties under IRC section 6721 and 6722 do not list IRC section 6019 as being included in the list of information returns subject to that penalty. Instead, I found IRC section 6716 which at one time had a $10,000 penalty for failure to file information with respect to certain transfers at death and gifts. However, that code section was repealed by Public Law 111-312 in 2010 with no replacement penalty for failure to file estate or gift tax returns. Thus, if no tax is due, the general penalty for failure to file a tax return would be zero.

[New York Enrolled Agent]

TGB gave you the correct code section §6651 which covers all returns under Subchapter A of Chapter 61 (other than Part III)

When you look at Chapter 61, Subchapter A, there are 8 parts. Here are the first three.

• PART I—RECORDS, STATEMENTS, AND SPECIAL RETURNS (§ 6001)
• PART II—TAX RETURNS OR STATEMENTS (§§ 6011 – 6021)
• PART III—INFORMATION RETURNS (§§ 6031 – 6060)

Note Part II contains §6019 - thus §6651 governs the treatment.

Why is Part III excluded from §6651? Because of §6721 which imposes the penalty on information returns in a manner different than the §6651 treatment.. Which information returns are covered? Those that are defined in §6724.

Even though the wording of the IRC is often not a model of clarity, the structure of the IRC is actually quite impressive.

[Lion]

You may not be a gift tax return expert, but gift tax returns with cash or cash equivalents are very easy for most of us tax preparers to prepare. You probably could've prepared her gift tax return in less time than this thread.

[Rapid Robert]

You may not be a gift tax return expert, but gift tax returns with cash or cash equivalents are very easy for most of us tax preparers to prepare. You probably could've prepared her gift tax return in less time than this thread.

Totally agree with this comment. After all, in the OP it wasn't stated that the taxpayer was wondering the consequence of not filing. It was the tax preparer who was asking. I don't do estate tax returns, but I certainly can and do prepare gift tax returns. Since you already have the taxpayer name/address info in your software, it should be extremely easy, and profitable.