Do you use gifts to manage your taxes? Be cautious and avoid these pitfalls that may end up costing you more:
You failed to include tax-free gifts.
You don’t have to declare certain types of financial assistance as gifts, including cash gifts to a U.S. citizen spouse, your child’s tuition, payments on medical bills of a relative without health insurance or insufficient insurance benefits, and monetary donations to political organizations. These exemptions or donations, however, may still have to be declared even if they’re tax-free.
You filed late (or did not file at all).
When you file your gift tax returns late, the non-cash estates you’re going to give can appreciate. For instance, a $13,000 property can appreciate at a rate of 20% to $15,600 the next year, which means you might owe taxes on that new amount. If you file the return late or don’t file it at all, you could face penalties that could add up and cost you thousands of dollars more.
Make sure you have IRS tax lawyers on your side if you want to negotiate with the federal tax collection agency when settling your debt. You may have a valid reason for the error, or you may find yourself in a special circumstance that makes your debt unaffordable. If so, your lawyer can help explore your options and facilitate negotiations with the IRS.