IRS Instruction 708 – In an increasingly globalized world, U.S. taxpayers may receive gifts or inheritances from individuals who have expatriated from the United States. If these transfers come from “covered expatriates,” they could trigger specific tax obligations under Section 2801 of the Internal Revenue Code. Enter IRS Form 708, a relatively new form designed to help U.S. citizens, residents, and certain trusts report and pay taxes on these transactions. Released in its final version in January 2026, Form 708 applies to transfers received starting in 2025. This comprehensive guide breaks down the IRS Instructions for Form 708, helping you navigate filing requirements, definitions, due dates, and more to ensure compliance and avoid penalties.
Whether you’re a U.S. recipient dealing with cross-border inheritances or a tax professional advising clients on expatriation-related taxes, understanding Form 708 is crucial. Let’s dive into the details.
What Is IRS Form 708 and Its Purpose?
IRS Form 708, titled “United States Return of Tax for Gifts and Bequests Received from Covered Expatriates,” is used to report covered gifts and covered bequests received during a calendar year from covered expatriates. It also calculates and facilitates payment of the Section 2801 tax on these items. This tax, imposed at a flat rate of 40%, targets transfers from individuals who relinquished U.S. citizenship or long-term residency after June 16, 2008, and meet certain criteria making them “covered expatriates.”
The form must be filed separately for each calendar year in which reportable items are received, including distributions from non-electing foreign trusts attributable to covered gifts or bequests. Notably, the filing obligation begins with 2025 transfers, with the first due date falling on June 15, 2027. This development stems from final regulations issued by the IRS on January 14, 2025, which provide operational guidance and make compliance more enforceable.
Key exclusions help limit the scope: No tax applies to transfers previously subject to U.S. gift or estate tax, charitable contributions, spousal transfers, or qualified disclaimers. Additionally, there’s an annual exclusion amount—$19,000 for 2025 and 2026 (inflation-adjusted thereafter)—below which filing may not be required, unless you’re a migrated foreign trust or electing to be treated as domestic.
Who Must File Form 708?
Not every U.S. person receiving an international gift or inheritance needs to file Form 708. The requirement applies specifically to:
- U.S. citizens or residents (determined by domicile) who receive covered gifts or bequests, including distributions from foreign trusts.
- Domestic trusts receiving such items.
- Non-electing foreign trusts that become domestic (migrated foreign trusts) during the year and have received covered items in prior or current years.
- Non-electing foreign trusts electing to be treated as domestic for Section 2801 purposes.
- Electing foreign trusts receiving covered gifts or bequests.
An exception exists if the total fair market value of covered items received in the year is $19,000 or less, but this doesn’t apply to migrated or electing foreign trusts. U.S. persons might also need to report related transactions on Form 3520 for broader foreign gift reporting.
If you’re unsure whether a transfer qualifies as covered, you can file a protective Form 708 with an affidavit and supporting documents to safeguard against penalties.
Key Definitions in IRS Instructions for Form 708
To accurately complete Form 708, familiarize yourself with these essential terms from the instructions:
- Covered Expatriate: An individual who expatriated after June 16, 2008, and meets at least one of: average annual net income tax liability exceeding $206,000 (2025) or $211,000 (2026) for the prior five years; net worth of $2 million or more on the expatriation date; or failure to certify tax compliance via Form 8854. Exceptions apply for certain dual citizens and minors.
- Covered Gift: Property received by gift from a covered expatriate on or after June 17, 2008, excluding items subject to gift tax or other exemptions.
- Covered Bequest: Property acquired due to a covered expatriate’s death on or after June 17, 2008, including items that would be in their hypothetical U.S. gross estate.
- U.S. Recipient: Includes U.S. citizens, residents, domestic trusts, or electing foreign trusts.
- Domestic Trust: A trust under U.S. court supervision with substantial decisions controlled by U.S. persons.
- Electing Foreign Trust: A foreign trust that elects domestic treatment for Section 2801.
- Migrated Foreign Trust: A non-electing foreign trust that becomes domestic after receiving covered items.
- Section 2801 Ratio: For non-electing foreign trusts, the proportion of trust value attributable to covered gifts/bequests (0 to 1).
These definitions ensure you’re reporting only taxable transfers while claiming applicable exclusions.
How to File Form 708: Step-by-Step Guidance?
Filing Form 708 involves reporting all covered items from covered expatriates on a single form per year. Here’s a breakdown:
- Gather Information: Determine fair market values at the date of receipt. Attach appraisals if needed.
- Compute the Tax: Subtract the annual exclusion ($19,000 for 2025-2026) from the total value, then apply the 40% rate. Reduce by any foreign gift or estate taxes paid (attach proof).
- Special Rules for Trusts:
- Domestic and electing trusts pay the tax directly.
- For non-electing foreign trusts, recipients pay on distributions.
- Foreign trusts electing domestic status must file timely, pay on prior and current receipts, designate a U.S. agent (via Form 2848), and notify distributees.
- Attachments: Include foreign trust instruments, foreign tax documents, and other supporting materials.
- Where to File: Mail to Internal Revenue Service, Kansas City, MO 64999, or use a designated private delivery service (PDS) for proof of timely filing.
- Extensions: Request a 6-month automatic extension via Form 7004 (payment not extended).
- Supplemental Filings: If corrections are needed, file a new form marked “Supplemental Information” with changes and a copy of the original.
For trusts, additional parts of the form (e.g., Part IV, VII, VIII) must be completed for elections or migrations.
Due Dates for Filing Form 708
Timely filing is critical to avoid penalties. The general due date is the 15th day of the 18th month after the calendar year closes—for example, June 15, 2027, for 2025 receipts. Special rules include:
- For covered bequests: The later of the 15th day of the 18th month after death or the 15th day of the 6th month after receipt.
- Migrated foreign trusts: 15th day of the 6th month after becoming domestic (e.g., June 15, 2026, for 2025).
- Electing foreign trusts with no receipts: 15th day of the 6th month after the election’s first year.
If the date falls on a weekend or holiday, it shifts to the next business day.
Penalties for Non-Compliance
Failing to file or pay on time can result in penalties under Section 6651, unless reasonable cause is shown. Return preparers face penalties under Section 6694. If notified of penalties, submit an explanation separately—don’t attach it to the form. For imperfect elections, failure to correct within six months may still qualify as reasonable cause if addressed promptly.
Download the IRS Instructions for Form 708
To get started, download the official IRS Instructions for Form 708 (Rev. December 2025) directly from the IRS website: https://www.irs.gov/pub/irs-pdf/i708.pdf. This PDF provides detailed line-by-line guidance to complete the form accurately.
For the form itself, access Form 708 (Rev. December 2025) at https://www.irs.gov/pub/irs-pdf/f708.pdf.
Final Thoughts on IRS Form 708 Compliance
Navigating taxes on gifts and bequests from covered expatriates requires careful attention to IRS rules, especially with the new Form 708 in play for 2025 and beyond. By understanding who must file, key definitions, and filing procedures, you can minimize risks and ensure accurate reporting. Always consult a tax professional for personalized advice, as cross-border transactions can involve complex interactions with other forms like 3520 or 8854.
Staying updated with IRS guidance is key—check the official IRS website regularly for any inflation adjustments or regulatory changes. With proper preparation, complying with Section 2801 tax obligations doesn’t have to be overwhelming.