What happens if you make a $100K gift but don't file required gift tax return?

While you wouldn't owe any gift tax due to the lifetime exemption (currently around $13.61 million per individual), you're still required to file Form 709 (Gift Tax Return) for any gift exceeding the annual exclusion amount (currently $18,000 per recipient). This filing is required even when no tax is due. If the IRS discovers the unreported gift, you could face penalties for failure to file, even without owing actual tax. The penalty is typically 5% of the tax due per month, up to 25%. Since your tax due would be $0, technically the penalty would calculate to $0 as well. However, the IRS can assess a minimum penalty for unfiled returns. More importantly, without filing the Form 709, you haven't officially claimed this $100,000 against your lifetime exemption, which could create documentation issues later in life or for your estate.

I had almost the exact same situation last year when I gave my son $90k for his business startup. I was totally confused about all the paperwork and missed filing the gift tax return. I started panicking about potential penalties even though I knew I wouldn't owe actual tax because of the lifetime exemption thing. I found this tool called taxr.ai (https://taxr.ai) that really helped me figure out my situation. You upload your documentation and it analyzes your tax situation, including unfiled forms like the gift tax return. It flagged that I needed to submit a late Form 709 and walked me through the process. Saved me tons of stress trying to figure out what to do after the fact.

Ok I have to admit I was super skeptical about taxr.ai when I commented earlier, but I ended up trying it for my own situation (gave my parents $50k to pay off their mortgage last year). I was really surprised how straightforward it made everything. I uploaded my bank statements showing the transfers, answered a few questions, and it immediately identified I needed a Form 709 and helped me prepare it. What I found most helpful was the explanation about how the lifetime exemption works - I had no idea I still needed to file even though I wouldn't owe anything. The site actually showed me how to properly report the gift against my lifetime exemption amount. Much easier than the 3 hours I spent trying to decipher the IRS instructions!

For anyone dealing with unfiled gift tax returns, I had a similar issue and couldn't get through to the IRS for clarification. Spent DAYS trying to call them. Finally found this service called Claimyr (https://claimyr.com) that got me connected to an actual IRS representative in under 15 minutes. They have this system that navigates the IRS phone tree and waits on hold for you, then calls you when an agent is on the line. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed I could file a late Form 709 without major penalties since I didn't actually owe gift tax (just using my lifetime exemption). They walked me through exactly what documentation I needed to include with the late filing. Such a relief to get official guidance instead of stressing about it!

I can't believe I'm saying this, but that Claimyr thing actually works. After posting my skeptical comment, I was still desperate to talk to someone about my unfiled gift tax return (gave my brother $120k last year), so I tried it. Within 20 minutes, I was talking to an actual IRS representative. I could tell it was legitimate because they verified my identity using my prior year tax info and could see my filing history. They explained exactly what I needed to do to file the late Form 709 and confirmed that since I wouldn't owe gift tax due to the lifetime exemption, there wouldn't be significant penalties - just interest on the late filing itself. Definitely wasn't a scam like I thought. Saved me from worrying about this for weeks longer.

Just wanted to add - I'm a tax preparer (not a CPA) and see this situation all the time. Besides the potential failure-to-file penalties, there's another reason to make sure you file Form 709 even if you don't owe gift tax: documentation for basis adjustment purposes. If you're gifting appreciated assets (not cash), the recipient generally takes your basis. Proper gift tax filing creates a record of that basis transfer, which becomes important when they eventually sell the asset. Without documentation, they might have trouble proving their correct basis to the IRS later. Even for cash gifts, proper documentation through Form 709 helps ensure the lifetime exemption amount is properly tracked. You definitely want to file the form.

Quick question - does anyone know how the IRS even finds out about gifts? Like if I write my kid a check for $50k, how would they know? My accountant is saying I need to file a gift tax return but my buddy says nobody actually does this for family gifts.

I'm dealing with a similar situation right now - gave my son $85k for his wedding last year and completely forgot about the gift tax return requirement. Like you, I knew I wouldn't owe any actual tax because of the lifetime exemption, but I had no idea I still needed to file Form 709. After reading through all these comments, I'm definitely going to file the late return. It sounds like the penalties won't be too severe since there's no actual tax owed, but I don't want to risk having issues down the road when my estate gets settled or if the IRS discovers the gift some other way. The key thing I learned from this thread is that filing Form 709 isn't just about paying tax - it's about properly documenting the gift against your lifetime exemption and creating a paper trail. Better to handle it now than worry about it later, especially since banks do report large transactions and the IRS has multiple ways to discover unreported gifts.

I'm in almost the exact same situation - gave my daughter $95k for her house down payment last year and completely missed filing Form 709. Reading through all these responses has been incredibly helpful and honestly a huge relief. The key takeaway for me is that this is really about documentation rather than owing actual tax. Since we're nowhere near the lifetime exemption limit (around $13.61 million), we won't owe gift tax, but we still need to officially report it to "use up" that portion of our lifetime allowance. What's really concerning me now is the point someone made about banks reporting large transactions. I did a wire transfer directly from my account to hers, so there's definitely a paper trail the IRS could discover. I'd rather file the late return proactively than wait for them to find it and then have to explain why I never reported it. From what I'm gathering here, the penalties for late filing when no tax is actually owed should be minimal, but the peace of mind and proper documentation will be worth it. Definitely planning to get this sorted out ASAP.

I'm dealing with almost the exact same situation as the original poster. I gave my son $110k last year to help with his first home purchase - direct bank transfer just like you described. I also handled my own taxes since my usual CPA was dealing with health issues, and I completely overlooked the Form 709 requirement. What really helped me understand the situation better was realizing this isn't about owing tax (since we're nowhere near that $13+ million lifetime limit), but about proper documentation. The IRS needs an official record that we've used that portion of our lifetime exemption, even when no actual tax is due. I ended up filing the late Form 709 about two months ago. The process wasn't as scary as I thought it would be - I included a reasonable cause statement explaining the circumstances (CPA unavailable, first-time large gift situation), and I haven't heard anything back from the IRS yet. From what I understand, when there's no actual tax owed, they're typically pretty reasonable about late filings, especially with documented reasonable cause. The peace of mind has been worth it. Better to be proactive and get it properly documented than worry about the IRS discovering that large wire transfer later and having to explain why it was never reported. Your situation with the accountant being on medical leave sounds like solid reasonable cause to me.