Caveat Emptor – When it Comes to Out-of-State Tax Preparers
I recently had a client come in who had made a gift of over $120,000 to her brother several years ago, using funds that had originally come from their mother. She used the mother’s accountant in Florida to prepare her gift tax return. The accountant, apparently unaware that North Carolina had a gift tax, failed to prepare an NC gift tax return or advise her about the tax.
The North Carolina Department of Revenue, by checking the federal gift tax returns filed by NC residents, became aware of the federal return and contacted my client. She now faces penalties and interest in addition to the tax due.
North Carolina allows the same $12,000 annual exclusions as the federal system, but rather than a $1 million lifetime exemption, there is only a $100,000 lifetime exemption, which applies only to ancestors and descendants.
I have seen other clients incur unexpected tax liability when their advisers were ignorant of NC gift tax laws. If you are considering make any large gifts, make sure you seek qualified tax counsel so that you don’t have any unpleasant surprises down the road. The taxman will cometh!