April 15 Still Due Date For 2020 Gift Tax Returns & Payments
Many taxpayers must file a 2020 federal gift tax return (Form 709) for 2020 gifts; some may owe taxes on those gifts. The IRS recently granted until May 17 an automatic extension of the April 15th deadline to file a 2020 federal individual income tax return (Form 1040) and pay income taxes owed. Nonetheless, that automatic extension did not include other federal tax returns or taxes due on April 15, such as the federal gift tax return (Form 709) and any gift taxes owed, both of which remain due then. Taxpayers may obtain an extension of time to file their gift tax returns until October 15, if by April 15 (a) they file an individual income tax return filing deadline extension request (generally, Form 4868, but in some cases Form 2350) or (b) if no Form 4868 or 2350 is filed, they file a federal gift tax return extension request (Form 8892). (Note that while filing a Form 4868 or 2350 after April 15 and by May 17 will still extend the individual income tax return filing deadline to October 15, doing so will not extend the April 15 gift tax return filing deadline, nor will a post-April 15 filed Form 8892). No return filing extension request will extend the April 15th gift tax payment deadline; payment of those taxes must accompany a timely filed (by April 15) Form 8892.
Legislative Proposal Would Increase Gift & Estate Taxes Significantly
Wealthy taxpayers may experience significantly greater federal gift and estate tax exposure if recently proposed legislation is enacted. The 2017 tax act doubled to what is now an inflation adjusted $11.7 million individual exemption from those taxes through 2025. Nonetheless, bills recently introduced in Congress would preemptively reduce that exemption to $1 million for gifts and $3.5 million for estates effective January 1, 2022. Additionally, the proposed legislation would end the substantial gift and estate tax savings available from many advanced estate planning techniques on the date of enactment, which may happen in 2021.
Before the end of 2020, many wealthy taxpayers rushed to implement advanced estate planning techniques fully to utilize their lifetime exemptions while in many cases continuing to enjoy the benefits of that wealth. Those taxpayers who did not may be in a hiatus of uncertain duration while the current $11.7 million exemption continues to apply. (Taxpayers who fully utilized their 2020 $11.58 million exemptions may give an additional $120,000 under the 2021 $11.7 million exemption). Accordingly, those taxpayers who have not yet fully utilized their current substantial exemptions with various advanced estate planning techniques are strongly encouraged to consult with their estate planning advisors to consider implementing such techniques as quickly as possible before they disappear.
Biden Administration Tax Proposals To Date
Lastly, the Biden administration recently announced proposed increases in the corporate income tax and other adverse business tax changes. While proposed adverse individual, gift, and estate tax changes were not included, they may be forthcoming or the administration simply may sign on to the gift and estate tax changes proposed in Congress that are described above, and propose individual income tax increases as well.
