Preparing for Estate and Gift Tax Return Deadlines

This time of year, income taxes are on everyone’s minds, but there may be other tax returns that you need to think about filing. In particular, you may need to file a gift tax return or an estate tax return. Learn what triggers the need to file these returns, the basics of estate and gift tax preparation and of course their tax return deadline.

Who Has to File a Gift Tax Return?

If you, as an individual, have given a gift of more than $16,000 to any other individual (besides your spouse) during tax year 2022, you must file an IRS Form 709 gift tax return. This is true even if you don’t actually owe any tax.

Gifts between spouses are unlimited and don’t trigger the filing of a gift tax return, but you may have to file one for gifts to children or anyone else. Note that you and your spouse can make a joint gift of up to $32,000 to an unlimited number of individuals without triggering the need to file a gift tax return. So, for instance, if you had five children and ten grandchildren, you could give gifts totalling $32,000 to each of them during a tax year without having to file a gift tax return.

What is the Gift Tax Filing Deadline?

The gift tax deadline for filing Form 709 is April 15 of the year following the year in which the gift was made. So, if you gave each of your children $50,000 on Christmas day in 2022, you would have to accommodate a gift tax return deadline by April 18, 2023 (because April 15 is a Saturday). If you request an extension before that date, you have until October 16 to file. Just remember that if you do owe any tax, you must pay it by the April 18 tax return deadline. An extension is only an extension of time to file, not to pay.

Who Has to File an Estate Tax Return?

Relatively few people need to file a federal estate tax return. If a person who has died (decedent) had a gross estate valued at more than the filing threshold for their year of death, an IRS Form 706 estate tax return must be filed. When calculating the amount of the decedent’s gross estate for estate tax purposes, any taxable gifts and specific gift tax exemption must be added back in. For tax year 2022, the filing threshold was $12,060,000 for an individual. If the gross estate was valued at less than that amount, as it is for most people, a federal estate tax return may not need to be filed.

Note that we just said “may not need to be filed.” That’s because a surviving spouse may want to elect portability of the unused Deceased Spousal Unused Exclusion (DSUE), and to do so, he or she will need to timely file Form 706.

To put it simply, a surviving spouse can claim and use the unused estate tax credit that their deceased spouse left behind. This is known as “electing portability;” the unused credit is transported from one spouse to the other. The surviving spouse may never need the credit, but it cannot be requested on their behalf after the fact, so it’s wise to elect portability just in case the surviving spouse’s estate exceeds their gift and estate tax exemption amount.

What is the Estate Tax Return Deadline?

The estate tax return deadline for filing Form 706 (and any required associated forms) is nine months after the date of the decedent’s death. As with the gift tax deadline, it is easy to request a six month extension of the time to file the return, but any estimated tax due must be paid before the nine-month deadline.

If a surviving spouse fails to elect portability by the tax return deadline (nine months after the decedent’s death) or the extended deadline (fifteen months), they may still be able to transfer their late spouse’s DSUE to themselves. That will depend on the amount of the decedent’s gross estate and adjustable taxable gifts. If the estate would have been required to file an estate tax return based on that amount, independent of a portability election, a surviving spouse cannot request a further extension to elect portability.

Electing portability of the DSUE can be a great benefit to the surviving spouse, so if this is a concern, seek a professional’s assistance with estate tax preparation.

What Information Must Be Included With an Estate Tax Return?

In addition to filing IRS Form 706 itself on behalf of a decedent’s estate, you may be required to file supplemental forms and provide additional information regarding the estate. At a minimum, you should be prepared to include:

  • Copies of the decedent’s death certificate
  • Copies of the decedent’s estate plan, including last will and testament and any trusts. (While trusts keep assets out of a probate estate, it does not exclude those assets from being considered for estate tax purposes.)
  • Copies of appraisals of any estate assets
  • Documentation of any litigation involving the decedent’s estate
  • Documentation of any unusual items referenced on Form 706, such as losses or transfers that took place near the date of the decedent’s death.

It may also be necessary to attach to the Form 706 estate tax return copies of previously-filed Form 709 gift tax returns. If you must do so, you must clearly mark each copy of those gift tax returns at the top of the page, indicating that they are being filed as an attachment to Form 706. It’s best to have the assistance of an estate tax preparation professional when preparing your filing.

The Bottom Line For Estate and Gift Taxes

Estate and gift taxes must be filed accordingly within their tax return deadline time period. To avoid problems with gift tax preparation or estate tax preparation, schedule an appointment today with the accounting and tax preparation professionals at Gudorf Tax Group.