Completed Sample IRS Form 709 Gift Tax Return for 529 Superfunding / Front-Loading

529Updated for 2018. Let’s say you are fortunate enough to be able to make a large contribution to a 529 college savings plan, perhaps for your children or grandchildren. You read from multiple sources that you are able to contribute up to $75,000 at once for a single person or up to $150,000 as a married couple (2018), all without triggering any gift taxes or affecting your lifetime gift tax exemptions. (From 2013-2017, these numbers were $70k/$140k). What you are doing is “superfunding” or “front-loading” with 5 years of contributions, with no further contributions the next four years.

Those are pretty big numbers, but any contribution above $15,000 will require you to file a gift tax return because that is the annual gift tax exclusion limit for 2018. ($14,000 for 2013-2017.) You’ll need to fill out IRS Form 709 [pdf], “United States Gift (and Generation-Skipping Transfer) Tax Return”. The instructions are quite long and confusing. You ask your accountant and they suggest talking to your estate lawyer. You may wish to avoid paying the $400 an hour or whatever it will cost as the form should be pretty straightforward.

So how do you fill out form 709 for a large but simple 529 contribution? Here are the resources that I found most helpful:

(Note that I have found what I consider minor errors and/or inconsistencies in some of the sample 709 forms above.)

Here’s a redacted version of my completed Form 709. Let me be clear that I am not a tax professional or tax expert. I am some random dude on the internet that did his own research to the best of his abilities and filled out the form accordingly. This is what my form looks like. It could be wrong. You’ll need to make changes to conform to your specific situation. Feel free to offer a correction, but please support your statement.

For my version, I am assuming that you and your spouse contributed the maximum $140,000 together. (I didn’t actually contribute that much.) The 2014 form is shown below, but I just did this for another kid using the 2017 form and I couldn’t find any differences. Note that you’ll need to file two separate gift tax returns, one for you and one for your spouse. Mail them to the IRS in the same envelope, and I like to send them certified mail.

f709_generic1_ediated

f709_generic2

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Here is my Form 709, Schedule A, Line B Attachment

Form 709, Schedule A, Line B Attachment

– Donor made a gift to a Qualified State Tuition Program (a 529 plan).

– Total amount contributed $140,000 in 2014.

– Donor elects pursuant to Section 529(c)(2)(b) of the IRS Code of 1982, as amended to treat the gift as having been made equally over a 5-year period.

– The gift was made jointly by the taxpayer and the taxpayer’s spouse on January 1st, 2014 and will be split equally in half.

– Election made for $140,000 over 5 years is equal to $28,000 total per year, or $14,000 per person per year.

– The contribution is for

Juniper Doe
Daughter
1234 Main St
New York, NY 10001

When to file Form 709. When taking the 5-year election, you must fill out the gift tax return (Form 709) by April 15th of the year following the year in which in the contribution was made. So if you make the contribution in 2018, you must file Form 709 by April 15th, 2019. If you make the upfront contribution in the first year and then make no future contribution in the next four years, you do not have to file a gift tax return after the one you did for the first year.

What if you’re late? Well, you should file the Form 709 as soon as possible. If you did not exceed the limits then technically there is no gift tax due, and there is no penalty that I could find for late filing when there is no taxes due. Still, I would file ASAP.

The tax information set forth in this article is general in nature and does not constitute tax advice. The information cannot be used for the purposes of avoiding penalties and taxes. Consult with your tax advisor regarding how aspects of a 529 plan relate to your own specific circumstances.

Comments

  1. I have a question regarding 529 plans…

    I have 2 kids, ages 7 and 4. I want to contribute to a 529 plan, but not sure if I should put it in my name or theirs. If it is in my name, I could perhaps give it to a niece or nephew should one or both my kids not attend college. If it is in the kids names, I presume I could pull it from one and give it to the other, but I’m just not sure how that all works. There is also the issue of financial aid. (If the 529 plan is in my name, does that make it easier for them to get financial aid and then I could transfer it to their name?)

    I’ve yet to see an article discussing the best plan of attack for 529 plans.

  2. Thanks for this post. I’m confused here, though. We have 529s for both our children. My understanding was that ownership of these accounts lies with the account holder and the children are beneficiaries. In other words, they count as our (the parents’) assets for the purposes of calculating financial aid and other net worth tests, and remain in our estate. As a result, I don’t understand why contributing to them could possibly be considered a gift and trigger this kind of IRS filing. What am I missing?
    Thanks.

  3. I am confused as to why you needed to file this. You get $14k per spouse. Why did you have the $28k come from one spouse rather than $14k from each spouse thus negating the necessity for the form?

  4. Based on my experience, this whole article seems misleading to me. 529 accounts are taxed by owner, not beneficiary. So this gift tax only applies if someone like a grandparent gives an account owner like a parent a large sum of money to invest. Otherwise, you just put the money in a 529 account under your name as the owner and you’re done; no forms required. Or did I miss something?

    @Maury: The account should be in your name. Then you control the money and can decide where you want it to go. You must designate a beneficiary, but you can change that along the way if needed (say your first child gets a big scholarship and doesn’t need all of the funds you set aside for them, so you redirect them to you second child).

  5. Mark Weber says:

    RE: Andy, TJ

    The reason for the IRS Form 709 filing is because the gift was actually for $140,000.00… This is called “superfunding” for 529s. A special rule for 529s permits you to make up to 5 years worth of annual gift exclusion transfers in a single year. So $14k per parent = $28k x 5 = $140k. After making this gift, you cannot transfer any more money for 5 years without incurring a tax. Why would someone superfund? Because that gives you 5 years of tax-free gains on a larger principal. Consider $140k @ 6% for 18 years compounded annually is ~$400k.

    RE: Scott

    529s are generally setup as “account holder” and “beneficiary”, with the parent being the account holder and the child being the beneficiary. This allows the account holder to make the decisions about how the money is used and invested. However, TRANSFERS TO A 529 ARE TREATED AS GIFTS TO THE BENEFICIARY, thus the need to be careful of the gift tax limit (currently $14,000).

    • Does anyone have sample of 709 using lifetime amount as portion of 5.3M?
      Basically I like to use 709 to report a gift value off $200K and not pat tax , as it will be part of $5.3M lifetime.

      • Milton Thorman says:

        I need a sample form of a 709 where a husband and wife give $70k to children for towards the purchase of a home.

  6. Hi,

    Thanks for uploading this form. Seeing as this is the only place on internet where such a completed form is available, I can’t thank you enough for the time and effort it saved me. That said, a few minor questions/remarks:

    – It would have been great if you filled in the SSN and signature fields (with fake values of course). Leaving some required fields blank means that the rest of the blank fields become suspect – should we fill them or not?
    – Why is total number of donees (line 10 of page 1) 2 and not 1?
    – The form says that if 11(a) is answered with a “No”, 11(b) must be skipped. You did not skip 11(b)
    – What about the “Gifts made by spouse —complete only if you are splitting gifts with your spouse and he/she also made gifts. ” section in part 1? Why did you not fill it? And if we fill that part, do we still need to complete two separate forms (one for each spouse) or is just one form enough?
    EDIT: Actually the instructions form for 709 is clear that we can’t file gift tax returns jointly. “A married couple may not file a
    joint gift tax return. However, if after reading the instructions below, you and your spouse agree to split your gifts, you should file both of your individual gift tax returns together (that is, in the same envelope) to help the IRS process the returns and to avoid
    correspondence from the IRS.”

    Thanks,
    P

    • Total number of donees should be 1 and not 2. I was editing my personal sheet which had 2 donees and made an error. If you only have one donee, then the form should note that. I will have to get back to the other questions.

    • I have updated the first page of my sample form 709.

      – Filled in SSN with fake numbers
      – Corrected total donees for sample case (one listed on sample form)
      – Skipped 11(b), left it blank instead
      – Added reminder for consenting spouse to sign and date

  7. When filing a Form 709 to report “superfunding” a QTP for a grandchild, do you also need to complete Part 2 of Schedule A to report this as a “direct skip”? Technically it IS a “direct skip” as an outright gift to a grandchild, BUT since it is sheltered by the $14,000 annual exclusion, is it also technically reportable in Part 2 as a “direct skip”? Can’t find an answer or example that addresses this in the IRS instructions. Obviously no tax due, but I have an aversion to “over-reporting” anything.

  8. Thank man. I appreciate it! I’m not sure why they make such a simple act so complicated to fill out. You saved me hours.

  9. Like the other said: Thank you so much!

    I swear it feels like my reading comprehension gets downgraded to “idiot level” when I have to read the IRS instructional booklets. I just can’t seem to make sense of their explanations.

    On the other hand, I appreciate your ability to explain the 709 form in a straight-forward manner. So helpful.

  10. Thank you sir!! I am glad someone took the effort for the rest of us to post a sample form. I have filed a 709 for a similar gift split for childs education fund with spouse and am filing one this year too.

    May be as an extension, could you add how your NEXT years form 709 would be if you were in a similar situation of having split 28k between your spouse and yourself again. I was struggling filling out schedule B (which you left empty as you indicated never having filed a gift tax before) especially columns c and e. If I understood correctly, column E refers to taxable gifts. In situations like yours (and mine), it would be zero and not 14k even though you gave 14 k out to your child. My reading of column C, “Enter the applicable credit against tax allowable for all prior periods” was similarly the amount of tax calculated for those taxable gifts. So also zero. Am I right?

    thanks

  11. MikeInSugarland says:

    Thank you for the detailed explanation !! I didn’t understand how it works until I saw it here. Here is a link to site that also explains how to fill out the 529 plan – it mirrors what this blog said as well – so it is confirmed.

    http://www.bayalisistheanswer.com/hitchhikers-guide-529-superfunding/

  12. Does anyone have sample of 709 using lifetime amount as portion of 5.3M?
    Basically I like to use 709 to report a gift value off $50K and not pay tax , as it will be part of $5.3M lifetime.

  13. Nina: I’ve been looking around as well and no one does. Everyone just mumbles out an answer. Some mention unified credit, but that word isn’t mentioned anywhere on the form.

    This is also why they go with easy numbers like 14000 that cancels out by annual exclusion.

  14. I’ve been debating whether to superfund our 529s and the remaining question has to do with state tax benefits. In my state I can deduct up to $20k annually for funding 529s. But if I superfund, do I lose the ability to deduct that for the 4 years following the initial superfund?

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