Penalties

Late filing and late payment. Section 6651 imposes penalties for both late filing and late payment, unless there is reasonable cause for the delay. There are also penalties for willful failure to file a return on time and willful attempt to evade or defeat payment of tax.

Reasonable-cause determinations. If you receive a notice about penalties after you file Form 709-NA, send an explanation and we will determine if you meet reasonable-cause criteria. Do not attach an explanation when you file Form 709-NA.

Accuracy-related penalties. Section 6662 provides a 20% penalty for underpayments of gift tax due to negligence, intentional disregard of rules and regulations, or a substantial or gross valuation understatement. A substantial valuation understatement occurs when the reported value of property is 65% or less of the actual value of the property. A gross valuation understatement occurs when the reported value of the property listed is 40% or less of the actual value of the property. No penalty will be assessed if the underpayment of tax, attributable to substantial or gross valuation understatement, does not exceed $5,000.

Return preparer. Penalties may also be applied to tax return preparers, including gift tax return preparers.

Gift tax return preparers who prepare any return or claim for refund that reflects an understatement of tax liability due to an unreasonable position are subject to a penalty equal to the greater of $1,000 or 50% of the income earned (or to be earned) for the preparation of each such return. Gift tax return preparers who prepare any return or claim for refund with an understatement of tax liability due to willful or reckless conduct can be penalized $5,000 or 75% of the income derived (or to be derived) for the preparation of the return. See section 6694 and, the related regulations, and Ann. 2009-15, 2009-11 I.R.B. 687, available at IRS.gov/pub/irs-irbs/ irb09-11.pdf , for more information.