Thinking about giving out some generous gifts this month to ease April's tax bill? You'll now need to adhere to some new rules concerning gift-giving. In essence, if you provide the IRS with adequate information regarding a gift, the tax agency has only three years to audit your return and won't be allowed to reopen it in a later estate audit. If you fail to provide adequate information, the IRS can audit you any time. As you know, taxpayers can make annual gifts of up to $10,000 ($20,000 per couple) tax-free to children, grandchildren or anyone else they designate.
How will the IRS know whether you've disclosed everything you should disclose? It says if you're giving anyone more than $10,000 in one year, you must file a gift-tax return by April 15 of the next year. Among other things, the new rules require you to describe the gift and give the name and relationship between the giver and the recipient. If you're giving away real estate or an interest in the family business, you must describe the valuation method used to determine its value or provide an appraisal from a qualified appraiser.
Joan Szabo is a writer in Great Falls, Virginia, who has reported on tax issues for more than 13 years.