- March 29, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Concerns about IRS Audits in Gifting Situations
My father is deeply concerned about the potential consequences if he were to be audited after gifting me $40,000. The last thing he wants is to face penalties or complications due to this generous act. As such, he has been exploring ways to protect himself and ensure that the money is gifted properly.
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****** just grabbed a
I just wrote an answer to almost this exact question in the current top post in this subreddit: https://www.reddit.com/r/personalfinance/comments/1bnne4r/if_my_dad_sends_me_80k_do_i_have_to_pay_taxes_on/
It’s totally legal for your dad to give you a gift like this, but he will have to report it on his tax return and it counts against his lifetime exemption from gift tax, which is currently about $14 million. Because that limit is so high, most people never have to pay gift taxes.
There are some misconceptions here in the thread. 
The 2024 gift tax limit is $18k per person. This means a person can give another person $18k and not have to tell the IRS anything. 
A person can gift up to $13.61 million tax free, you just have to report any amount over the $18,000 on a gift tax return. 
There is no need to split the gift over 3 years. You can do that if you donÔÇÖt want to utilize your lifetime exemption, but most people will not have to worry about a taxable estate at death.┬á
He can look up how gift tax writedowns work, and if he’s married write down his lifetime exclusion by $4K or if he’s single writedown his lifetime exclusion by $22K on form 709 when he files his taxes in 2025.
The lifetime exclusion is $27.22MM for a married couple and $13.11MM for a single person.
Read this and all your (and his) questions should be answered: https://www.reddit.com/r/personalfinance/wiki/gifts
>What can he do to ensure that he gives the money without penalty?
Avoid giving you another $13,570,000 before 1/1/2025 and fill in Form 709 for TY 2024 accurately.
There’s no penalty ahead for him even if he does give you $40,000 and a further amount of >$13,570,000 before 1/1/2025, simply a few USD in gift tax that shouldn’t concern him in the slightest if he’s got >$13,610,000 to give away this year.
Is he worried about paying taxes or getting audited? People seemed to have assumed itÔÇÖs about taxes but if itÔÇÖs about getting audited thatÔÇÖs a different matter. Is this money from a legal source and has it been claimed as income in the tax year it was earned? As nice as it would be to have that money, if it puts you in the middle of some legal issues itÔÇÖs probably not worth it.
Report the excess to the IRS and be done with it? What’s the problem here(
I had $30k gifted to me. The IRS asked the relative for a gift letter that we just made up and sent to them. It wasnÔÇÖt a big deal in the end.
Gift tax k8cks in after you gift 13 million dollars. $40k isnt going to be taxed at all. It just has to be reported so the IRS can deduct it from your Dads lifetime limit if $13M so they know he only has $12.96 million to go before getting taxed.
Long story short this is a non-issue
Gifts are not taxable until they reach something like $13.5M lifetime. He just needs to file form 709 and report the gift. Neither of you will owe for that.
How does he have a spare 40K to gift but not have a CPA he can call to ask this?
He needs to break it up over three years. The 2023 Gift Tax Exclusion is $17,000. In 2024, it will be $18,000.
[https://www.irs.gov/instructions/i709](https://www.irs.gov/instructions/i709)
[https://www.irs.gov/businesses/small-businesses-self-employed/gift-tax](https://www.irs.gov/businesses/small-businesses-self-employed/gift-tax)
Is there a specific reason? There is an amount he can give per year tax free. You could break it up over 2-3 years