Filing A Gift Tax Return? Don’t Forget The Business Valuation Report

Gift Tax Return | Business Valuation Report | Ohio CPA Firm
You have dedicated more than a few years building and growing your business, don’t you want to know what it’s truly worth and how its overall value can impact your personal wealth strategy? A business valuation can help you answer these questions and more.

Valuation Reports Are Essential If You’re Gifting All, Part Of Your Business

Business owners who have made the decision to gift all or a portion of their business might believe that simply filing a complete and accurate gift tax return with the IRS is enough to satisfy the government’s thirst for information – and tax dollars. Unfortunately, this is not always the case. Filing a gift tax return is a good start, but it really only helps the IRS decide whether the matter should be examined further or not. If you really want to keep the government happy and out of your business, a business valuation is the way to go.

Your business’s valuation report, when coupled with your gift tax return, will provide the IRS with the information needed to ensure that the government has received its share of the proverbial pie.

Read Also: Reasons To Know Your Business’s Value

Three Years = Better Than Forever

Gift Tax Facts | Ohio CPA Firm
Did you know that only individuals are required to file gift tax returns? If a trust, estate, partnership or corporation makes a gift, the individual beneficiaries, partners or stockholders are considered donors and may be liable for the gift and GST taxes. Read on to learn more.

In addition to the many, many great reasons we’ve explored over the years in favor of having a qualified business valuator conduct a professional valuation on your business; perhaps the one that really hits home among those who are in the process of retiring is the prospect of triggering a three-year statute of limitations.

Here’s how it works. Those who file an accurate business valuation alongside their gift tax return will be treated to the gift of limiting the IRS to a three-year-window in which they can come back and make adjustments to their tax rate. On the other hand, those who do not file an accurate business valuation (completed by a qualified business valuator) alongside their gift tax return will not trigger this statute of limitations. As a result, the IRS can legally revisit the gift tax filing and assess the gift or estate taxes at a higher rate any time. And since the IRS has all the time in the world to revisit your gift tax return, you can bet that they will take their time to conduct an even more thorough examination of your file – resulting in greater costs and more sleepless nights.

Protect Yourself

Remember, your business is your most valuable asset and when you make big decisions without the most accurate information available, you are setting yourself up for failure by opening yourself up to a variety of risks.  Over the course of your career, you’ve learned the value of establishing and maintaining accurate records, the same is true as you prepare to conclude your business ownership journey. Moreover, you’ve dedicated more than a few years building and growing your business, don’t you want to know what it’s truly worth and how its overall value can impact your personal wealth management strategy? Email Rea & Associates to learn how our business valuations and transactions team can help you seamlessly transition into retirement, comply with your reporting requirements and maximize your wealth management strategy.

By Mary Beth Koester, CVA, CEPA (Dublin office)

For more insight about the importance of business valuations, check out these articles:

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