During this income tax season, please make sure that your income tax return preparer knows if you have made any gifts during the year. In certain cases gift tax returns are required to be filed even if there is no tax due. In other cases, it can be advisable to report all gifts whether or not they require the filing of a gift tax return.
Some years back Congress changed the laws with respect to the finality of gift tax returns to help with the preparation of estate tax returns but in the process, made things somewhat more complex. Basically, if you report a gift and provide all the details on a gift tax return, the statute of limitations will run on the gift usually in three (3) years similar to the manner that the statute runs with respect to income tax returns.
However, even if you file a gift tax return but do not report one or more gifts or do not report them completely, there is now no statute of limitations. The opposite is true of an income tax return. If income tax returns are filed and items are inadvertently left off, the statute of limitations will run on the income normally in about three years in most cases.
In some instances, where there are substantial unreported amounts, time limits can be longer. Again, the same is not true with the gift tax return. There may be no statute of limitations.
For all the above reasons, please make sure that if you made any gifts, you report them to your income tax return preparer so that he or she can consider filing a gift tax return. My suggestion is that if there is any doubt, the doubt should be resolved in favor of filing a gift tax return and reporting all gifts.
If you have engaged in any estate planning that involves the transfer of assets to a third party, make sure your income tax preparer knows about these. This also applies if you set up Charitable Remainder Trusts or Irrevocable Life Insurance Trusts.
Also, if you are ever late in filing gift tax returns, it is better to be late than not file at all.