Form 709 Federal Gift Tax Return Checklist for Tax Year 2021
Overview
Form 709 serves as the United States Gift and Generation-Skipping Transfer Tax Return for calendar year 2021, documenting taxable gifts and generation-skipping transfers made during the year. This form serves as both a reporting mechanism for current-year gifts and a vehicle for allocating lifetime GST exemptions, thereby creating a cumulative tax history that directly impacts future gift tax calculations and eventual estate tax computations.
Critical 2021 Tax Year Amounts
For gifts made during calendar year 2021, the following dollar thresholds govern filing requirements and tax calculations:
Annual Exclusion: $15,000 per donee for gifts of present interest to any individual other than a spouse
Non-Citizen Spouse Exclusion: $159,000 for gifts to a spouse who is not a U.S. citizen, provided the gift qualifies for the marital deduction.
Basic Exclusion Amount: $11,700,000, representing the lifetime exemption available to each donor
Applicable Credit Amount: $4,625,800, calculated on the basic exclusion amount and reducing gift tax liability
GST Exemption: $11,700,000 available for allocation to generation-skipping transfers
Top Tax Rate: 40% applicable to taxable gifts and generation-skipping transfers
Filing Deadline: April 15, 2022, or the next business day if April 15 falls on a weekend or legal holiday
Electronic Filing: Form 709 became available for electronic filing through the IRS Modernized e-File system starting July 1, 2021
Filing Requirements
You must file Form 709 for calendar year 2021 if any of the following apply:
● You made gifts to any one person other than your spouse totaling more than $15,000 during 2021, excluding gifts that qualify for political organization, educational, or medical exclusions
● You made any gifts of future interests, regardless of the gift amount
● You wish to elect gift splitting with your spouse for 2021 gifts, regardless of gift amounts
● You are applying deceased spousal unused exclusion amounts from a predeceased spouse
● You made generation-skipping transfers during 2021, requiring GST exemption allocation
● You made gifts exceeding $159,000 to a non-citizen spouse
Transfers Not Subject to Gift Tax
The following transfers need not be reported on Form 709:
● Direct payments of tuition to qualifying educational organizations on behalf of any individual
● Direct payments of medical expenses to healthcare providers on behalf of any individual
● Transfers to political organizations described in section 527
● Transfers to specific exempt organizations under sections 501
● Gifts of present interest totaling $15,000 or less per donee during the calendar year
● Most gifts to your spouse who is a U.S. citizen, regardless of the amount
● Gifts to a non-citizen spouse within the $159,000 annual exclusion
Ten-Step Filing Checklist
Step 1: Gather Donor Information and Determine Filing Status
Collect your legal name, Social Security number, current mailing address, legal residence at the time of the gift, and citizenship status. Document whether you died during 2021, as this triggers special filing deadlines. Determine whether you filed any prior Form 709 returns, as this affects Schedule B completion. Verify your marital status throughout 2021 if you're considering gift splitting.
Step 2: Compile Complete Gift Documentation
For each gift made during 2021, obtain the donee’s full name and complete address, relationship to you if applicable, detailed property description, your adjusted basis in the property, date the gift became complete for tax purposes, and fair market value as of the gift date. For securities, obtain CUSIP numbers. For closely held business interests, get the entity’s EIN. For gifts in trust, obtain the trust's EIN and either a copy of the trust instrument or a detailed description of the trust terms.
Step 3: Classify Gifts by Tax Treatment Category
Separate all 2021 gifts into three categories for Schedule A reporting. Part 1 includes gifts subject only to gift tax made to non-skip persons. Part 2 includes direct skips subject to both gift tax and generation-skipping transfer tax made to skip persons more than one generation below you. Part 3 includes indirect skips and transfers to trusts that may be subject to GST tax in the future. Gifts to skip persons typically include grandchildren or unrelated individuals more than 37.5 years younger than you.
Step 4: Complete Part 1 General Information
Enter your identifying information on lines 1 through 11. On line 11, indicate whether you filed any prior Form 709 returns. If you are married and wish to split gifts, complete lines 12 through 18. Check whether you are applying deceased spousal unused exclusion amounts on line 19. If you died during 2021, your executor must file Form 709 by the earlier of the estate tax return due date with extensions or April 15, 2022.
Step 5: Address Gift Splitting Election
If you were married for all of 2021, both spouses were U.S. citizens or residents, and you wish to treat all 2021 gifts to third parties as made one-half by each spouse, complete the gift splitting section. Check Yes on line 12, enter your spouse’s name and Social Security number on lines 13 and 14, and have your spouse sign the consent on line 18. Gift splitting applies to all gifts made during the calendar year while married; you cannot split only certain gifts. Your spouse must sign the consent for the election to be valid.
Step 6: Complete Schedule A Listing All Reportable Gifts
For each gift, enter in Schedule A the item number, donee name and address, relationship, property description, donor’s adjusted basis, date of gift, fair market value at gift date, and if splitting gifts, one-half of the value. If any reported value includes discounts for lack of marketability, minority interest, fractional interest, or other reasons, answer Yes at the Schedule A header and attach a detailed explanation of the discount basis and amount. For qualified tuition program contributions exceeding $15,000 to any one beneficiary, you may elect to treat up to $75,000 as made ratably over five years by checking line B and attaching the election statement.
Step 7: Apply Annual Exclusions and Calculate Net Gifts
Complete Schedule A, Part 4, to reconcile total gifts to taxable gifts. Enter total gift values from Parts 1, 2, and 3 on line 1. Enter total annual exclusions on line 2, applying the $15,000 exclusion to each donee receiving present interest gifts and zero exclusion to future interest gifts. Subtract annual exclusions from total gifts on line 3. Enter marital deduction amounts on line 4 for gifts to your U.S. citizen spouse or present interest gifts within the $159,000 annual exclusion to your non-citizen spouse. Enter charitable deduction amounts on line 5. Calculate taxable gifts on lines 6 through 11.
Step 8: Complete Schedule B for Prior Period Gift
Suppose If you answered Yes to line 11a regarding prior Form 709 filings, complete Schedule B. For each prior year or quarter in which you filed Form 709, enter the calendar year or quarter, IRS office where filed, applicable credit amount previously claimed, specific exemption for pre-1977 gifts if appropriate, and taxable gifts reported. Total these amounts on Schedule B line 3 to determine aggregate prior period taxable gifts, which transfers to Part 2 line 2 for tax calculation purposes.
Step 9: Complete Schedule C for Deceased Spousal Unused Exclusion
If you are a surviving spouse whose deceased spouse died after December 31, 2010, and the executor elected portability on the deceased spouse’s timely filed Form 706, complete Schedule C. Enter your deceased spouse’s name and date of death. Calculate the DSUE amount by entering your basic exclusion of $11,700,000 on line 1, adding any DSUE amount from your last deceased spouse on line 2, and totaling on line 4. Enter any DSUE amount you wish to apply to current gifts in Part 1 of Schedule C. Attach the first four pages of your deceased spouse’s Form 706 showing the portability election.
Step 10: Complete Schedule D for Generation-Skipping Transfers
If you had any direct skips reported in Schedule A Part 2 or indirect skips reported in Schedule A Part 3, complete Schedule D. In Part 1, list each direct skip by item number from Schedule A, enter the value, nontaxable portion, and net transfer. In Part 2, calculate the GST exemption available by starting with the $11,700,000 exemption for 2021, subtracting the exemption claimed in prior periods, determining the exemption available for this return, and allocating the exemption to current transfers. In Part 3, calculate GST tax by determining the inclusion ratio, applying the 40% maximum rate, and computing tax due. GST exemption automatically allocates to indirect skips unless you attach an election out statement.
Step 11: Calculate Tax Liability in Part 2
Enter taxable gifts from Schedule A, Part 4, line 11, on Part 2, line 1. Enter prior period taxable gifts from Schedule B line 3 on line 2. Add lines 1 and 2 on line 3. Using the gift tax rate table in the instructions, compute the tentative tax amount on line 3 and enter it on line 4. Compute the tax on prior-period gifts from line 2 and enter it on line 5. Subtract line 5 from line 4 and enter the balance on line 6. Enter applicable credit amount on line 7, which equals $4,625,800 for 2021 unless you claimed credit in prior years or are applying DSUE amounts from Schedule C. Subtract applicable credit from line 6 to determine net gift tax. Add any GST tax from Schedule D Part 3 on line 16 to determine the total tax due on line 17.
Step 12: Sign, Assemble, and File the Return
Sign and date Form 709 under penalties of perjury. If you are gift splitting, your spouse must sign the consent form on line 18. If a paid preparer assisted, the preparer must sign and provide a PTIN. Attach all completed schedules in order: Schedules A, B if applicable, C if appropriate, and D if applicable. Attach required documentation, including qualified appraisals or detailed valuation descriptions, copies of trust instruments or prior year Schedule A descriptions for trust gifts, the deceased spouse’s Form 706 if claiming DSUE, and any election statements such as GST automatic allocation opt-outs or qualified tuition program five-year elections.
For paper filing, mail the original signed return to the Department of the Treasury, Internal Revenue Service Center, Kansas City, MO 64999. If using a private delivery service, mail to the Internal Revenue Service, 333 W. Pershing Rd., Kansas City, MO 64108. Alternatively, file electronically through the IRS Modernized e-File system, which is available for Form 709 starting July 1, 2021. File by April 15, 2022, or the next business day if April 15 falls on a weekend or legal holiday.
Special Considerations
Adequate Disclosure: To begin the statute of limitations, your gift must be adequately disclosed. This requires a complete Form 709, including property description, consideration received, donee identity and relationship, trust EIN, and terms (if applicable), as well as either a qualified appraisal or a detailed valuation method description that meets the requirements in Regulations section 301.6501.
Valuation Discounts: If any reported value includes discounts, answer Yes on Schedule A and attach an explanation detailing the discount type, basis, and amount. Substantial valuation understatements occur when the reported value is 65% or less of the actual value, triggering 20% penalties. Gross valuation understatements occur when the reported value is 40% or less of the actual value, triggering 40% penalties.
Nonresident Noncitizens: If you were neither a U.S. citizen nor resident when making gifts, you are subject to gift tax only on gifts of tangible property in the United States. Most credits and deductions available to citizens and residents do not apply. Only the annual exclusion is available.
Extensions: To extend filing time, use Form 4868 or Form 2350 for income tax extensions, which automatically extend gift tax return filing. Alternatively, file Form 8892 specifically for gift tax extensions. Extensions do not extend the time to pay tax; payment is due by the original April 15 deadline to avoid interest and penalties.
Joint Returns Prohibited: Married couples may not file joint gift tax returns. Each spouse must file a separate Form 709 reporting their gifts and, if gift splitting is elected, their share of the split gifts.
Electronic Filing: Beginning July 1, 2021, taxpayers and tax professionals may file Form 709 electronically through the IRS Modernized e-File system, providing a faster and more secure filing method compared to traditional paper filing.
Conclusion
Filing Form 709 for tax year 2021 requires careful attention to the $15,000 annual exclusion per donee, the $11,700,000 basic exclusion amount, the $159,000 annual exclusion for non-citizen spouses, and comprehensive documentation of all reportable gifts. Proper completion of all applicable schedules, adequate disclosure of gift values, and timely filing by April 15, 2022, ensure compliance with federal gift tax regulations and preserve your ability to utilize lifetime exemptions efficiently. Beginning July 1, 2021, the IRS Modernized e-File system offers taxpayers an additional convenient filing option.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
