Late 2012 saw an unprecedented amount of gifting, as taxpayers sought to use up their unified credit before it was slated to shrink up in 2013. As a result, the IRS should be swamped with gift tax returns for 2012. Taxpayers looking to reduce audit exposure should think about the timing of their gift tax return filing.
The return is due on April 15, 2013, but can be extended for up to six months automatically. Normally, from an audit perspective, it probably does not make much of a difference when the return is filed.
Let’s look ahead to 2016 when the normal 3 year statute of limitations for 2012 gifts will be expiring. Because of the large number of expected 2012 filings, it is reasonable to predict that the IRS will be understaffed to some degree in its ability to give its normal review to all of the filings. Taxpayers who filed by April 2012 will have their statutes expire in April 2016. Those who do not file until October 2012 will be giving the IRS an extra six months to examine the return. If the IRS is short-staffed, that extra six months may be the difference between the IRS having the time to review the return or not.
Now, of course, professionals will be swamped with trying to get the Form 709’s done by April. Thus, even if clients may want to get the return filed timely, their CPAs and attorneys may be unable to accommodate them. But at a minimum, clients should get their materials over to their tax preparer sooner rather than later, to get the process started.