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Summary: I have to file a U.S. gift tax return. The accountant wants $750 to prepare it. I think I can prepare it myself. Bad idea?


My spouse and I are citizens and residents of the United States. There is a limit on the amount of money we can give to our kids in any calendar year without triggering the obligation to file a gift tax return, and I have inadvertently exceeded it. Whoops! (As problems go, that is not a bad one to have.)

In any case we will not actually owe any gift tax. There is a lifetime exemption of 5.5 million dollars each and I do not expect that we will ever come anywhere close to exceeding this. But we are required to file the returns (IRS Form 709) for tax year 2018. My tax accountants say they usually bill around $750 to prepare a Form 709. Wow!

I am considering whether it would be reasonable to prepare the returns myself. I have looked at the form and I am in the process of reading the instructions, which do not seem confusing or unreasonably long. It appears to me that our gift tax situation is unusually simple:

  1. Only the one gift so far
  2. No tax actually owed
  3. No gifts to report from prior years
  4. No DSUE
  5. No GST
  6. No QTIP

Possible complications:

  1. I would be filing a nearly-identical return for my spouse
  2. The gifts were to a Qualified Tuition Program

neither of which seems too difficult. Also, I do not expect to take advantage of the option to pro-rate the gift over five years, as it wouldn't get me out of filing the returns this year.

The Paperwork Reduction Act notice in the Form 709 instructions estimates that completing and filing the form will total around six hours, which I consider reasonable effort for avoiding a $750 accountant bill. Also I expect it will take somewhat less time than this, as I have few records to gather.

So from here it looks reasonable, but perhaps I am in a Dunning-Kruger situation, and I am so ignorant of tax preparation matters that I am oblivious to my own incompetence.

My questions:

  1. Is this obviously a terrible idea? If so, what might go wrong?
  2. If it's not an automatically terrible idea, are there any surprise pitfalls that I might not foresee?
  3. What else should I have asked but I didn't know to ask?
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First, 2017. Right? You are filing the 2017 return.

The 529 plan has a 5 year look ahead. One can “power deposit” as much as 5 years’ value.

This means you don’t need to tap your lifetime exemption at all. The 709 is still required, and no, it won’t be tough to fill out. I have no idea how the time is calculated, but if it takes more than an hour, I’d be shocked.

  • Thanks. 2018, not 2017. The gift was this year, so my question concerns next year's filings. I don't see why the 5 year look ahead is relevant. (I mentioned this in my question.) To take advantage of the power deposit I would need to file the return anyway, and my question is mainly about whether I can avoid paying the accountants $750 to prepare it. Also, can you please address my questions about whether there are any potentially unpleasant surprises in wait for me? – Sudo Nonimus Mar 28 '18 at 23:20
  • The five-year look ahead is relevant because it means you were not dipping into your lifetime exemption. I hope one day you have enough money to think back and be grateful that you didn’t have to get back into it. But either way it’s a matter of mental accounting as well as somewhere on the form. No, I don’t believe there are any gotchas on the 709, it was pretty simple from what I remember. – JoeTaxpayer Mar 28 '18 at 23:30
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Completing the first Form 709 is straightforward, later ones are slightly more complicated since you need to look back and write down how much of your exemption you have already used up in previous years, and some math to do if the lifetime exemption amount has changed over the years. One thing to hope for is that the whole thing just goes away: eliminating the estate tax entirely is greatly desired by one political party and they are currently in a position to do something about it without worrying about Presidential vetoes.

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