What IRS Form 709 (2016) Is For

Form 709 is the United States Gift (and Generation-Skipping Transfer) Tax Return used to report transfers subject to federal gift and certain generation-skipping transfer (GST) taxes. You must file Form 709 if you made gifts in 2016 totaling more than $14,000 to any single recipient (other than your spouse), gave any gifts of future interests regardless of amount, or wish to elect gift-splitting with your spouse (IRS Instructions for Form 709 (2016)). The form also tracks your lifetime gift tax exemption usage and allocates GST exemption to qualifying transfers.

When You'd Use Form 709 for 2016 (Late or Amended Filing)

You might need to file a late 2016 Form 709 if you received IRS notices about unreported gifts, discovered you made reportable gifts exceeding the $14,000 annual exclusion, or need to make elections for generation-skipping transfer tax purposes.

Late filing is common when taxpayers initially believed their gifts qualified for exclusions but later learned otherwise, or when family limited partnerships or other complex arrangements weren't properly reported.

According to IRS guidelines, if no tax is actually due, there's no penalty for late filing a gift tax return (IRS Instructions for Form 709). You might also file an amended return to correct valuation errors, add missing gifts, or make retroactive elections that affect your lifetime exemption tracking.

Key Rules Specific to 2016

For 2016, the annual gift exclusion remained at $14,000 per recipient, while the lifetime basic exclusion amount was $5,450,000 with a corresponding basic credit amount of $2,125,800.

The annual exclusion for gifts to non-citizen spouses was $148,000 (IRS Instructions for Form 709 (2016)).

This was before the Tax Cuts and Jobs Act significantly increased the lifetime exemption, making 2016 exemption amounts much lower than current levels. If you made large gifts in 2016, they may have consumed more of your lifetime exemption than similar gifts would today.

The portability election rules allowing surviving spouses to use their deceased spouse's unused exemption (DSUE) were also fully in effect for 2016.

Step-by-Step (High Level)

• Gather Documentation: Obtain gift tax transcripts from IRS for prior years, collect all 2016 gift documentation, appraisals, and records of any prior Forms 709 filed
  
  
• Complete Form 709 (2016): Use the specific 2016 version of the form, not current year forms, reporting all gifts over $14,000 and any future interest gifts regardless of amount
  
  
• Attach Required Schedules: Complete Schedules A (gift computation), B (gifts from prior periods), C (deceased spousal unused exclusion if applicable), and D (GST tax computation) as needed
  
  
• Submit Properly: Mail to IRS Cincinnati, OH 45999 with appropriate documentation; e-filing may be available through authorized providers for late returns
  
  
• Maintain Records: Keep copies of the return, supporting documentation, and proof of mailing for at least four years after filing
  
  

Common Mistakes and How to Avoid Them

• Inadequate Disclosure: Failing to provide sufficient detail about gifts, especially discounted valuations or family entity transfers, can leave the statute of limitations open indefinitely. Include detailed descriptions, appraisals, and valuation methods (IRS Instructions for Form 709)
  
  
• Wrong Schedule Usage: Reporting generation-skipping transfers on the wrong part of Schedule A—direct skips belong on Part 2, not Part 1
  
  
• Missing Valuation Discount Checkbox: Forgetting to check the valuation discount box on Schedule A when claiming lack of marketability, minority interest, or other discounts
  
  
• Gift-Splitting Election Errors: Both spouses must file individual returns when electing gift-splitting, and the consenting spouse must sign; incomplete elections can void the benefits
  
  
• GST Exemption Allocation Mistakes: Failing to properly allocate generation-skipping transfer exemption or making elections on untimely returns limits future planning opportunities
  
  
• Omitting Required Attachments: Not including mandatory statements for special elections, QTIP elections, or section 2701 valuations can invalidate important tax positions
  
  

What Happens After You File

The IRS typically takes several months to process gift tax returns, longer for complex returns requiring examination.

You'll receive acknowledgment of receipt, and if there are questions, expect correspondence requesting additional documentation or clarification.

If you owe tax, you can request an installment agreement using Form 9465, with interest and penalties continuing to accrue (IRS.gov).

The IRS has three years from filing to assess additional gift tax if the return is adequately disclosed, but this period remains open indefinitely for inadequately disclosed gifts (IRM 4.25.1).

If the IRS proposes changes you disagree with, you have appeal rights through the Office of Appeals before any collection action begins.

FAQs

Can I still file a 2016 Form 709 now without penalties?

Yes, if no tax is due, there's no penalty for late filing according to IRS instructions. However, you lose certain protections and elections may be limited on late returns.

How do I get transcripts for prior gift tax returns?

Request Form 709 transcripts by calling the IRS at 800-908-9946 or submitting Form 4506-T specifically requesting gift tax return transcripts.

What if I need to amend my 2016 Form 709?

File Form 709 for 2016 marked "Amended Return" at the top. You can generally amend within three years of the original due date or filing date, whichever is later.

Do I need to file a state gift tax return too?

Most states don't have separate gift taxes, but Connecticut and Minnesota had gift taxes in 2016. Check your state's requirements independently.

What if I can't pay the gift tax due on my late 2016 return?

File the return anyway to stop penalties from increasing, then request an installment agreement using Form 9465. Interest continues but failure-to-pay penalties are reduced while on an approved payment plan.

Can I make GST exemption elections on a late 2016 return?

Some elections can be made on late returns, but they're generally effective as of the filing date rather than the original due date, which may reduce their benefits.

What records should I keep after filing?

Maintain the filed return, all supporting documentation, appraisals, and proof of mailing for at least six years, longer if the return was inadequately disclosed according to IRS record retention guidelines.

‍