IRS Form 708 – In today’s globalized world, receiving gifts or inheritances from former U.S. citizens or long-term residents who have expatriated can come with unexpected tax implications. If you’re a U.S. taxpayer dealing with such transfers, IRS Form 708 is essential. This form, officially titled “United States Return of Tax for Gifts and Bequests Received from Covered Expatriates,” helps report and calculate taxes under Section 2801 of the Internal Revenue Code. Introduced for transfers starting in 2025, it ensures compliance with rules targeting “covered expatriates.” In this SEO-optimized article, we’ll break down what Form 708 is, who must file it, filing requirements, and more, using the latest official guidance.
What Is IRS Form 708 and Its Purpose?
IRS Form 708 is a specialized tax return designed to report “covered gifts” and “covered bequests” received from covered expatriates. Unlike traditional gift or estate taxes where the donor or estate pays, the recipient bears the tax burden here. These are transfers of property by gift or inheritance from individuals who expatriated (renounced U.S. citizenship or terminated long-term residency) on or after June 17, 2008, and meet specific criteria making them “covered expatriates.”
The form’s primary purpose is to calculate and pay the Section 2801 tax, which applies at the highest federal estate or gift tax rate—currently 40% for 2025 and beyond. This tax aims to prevent tax avoidance by taxing U.S. recipients on assets that might have otherwise escaped U.S. taxation due to expatriation. Covered gifts include direct gifts, while covered bequests encompass inheritances or distributions from estates. Importantly, this also covers indirect receipts, such as distributions from foreign trusts attributable to covered transfers.
The rules apply to receipts on or after January 1, 2025, following final regulations issued in January 2025. For earlier transfers, protective filings may be advisable to start the statute of limitations if status is uncertain.
Who Is a Covered Expatriate?
A covered expatriate is someone who expatriated after June 16, 2008, and falls into one of these categories at the time of expatriation:
- Average annual net income tax liability exceeding $201,000 (for 2026, adjusted for inflation) over the five prior years.
- Net worth of $2 million or more.
- Failure to certify compliance with U.S. tax obligations for the five years before expatriation.
Expatriation includes renouncing U.S. citizenship or ending long-term green card status. Not all expatriates are covered—those below these thresholds or with proper certifications are exempt.
Who Must File IRS Form 708?
Filing is required if you receive covered gifts or bequests exceeding a certain threshold. Specifically:
- U.S. Citizens and Residents: Individuals domiciled in the U.S. (note: “resident” here follows estate/gift tax rules based on domicile, not income tax residency).
- Domestic Trusts: Trusts treated as U.S. for tax purposes that receive covered transfers.
- Electing Foreign Trusts: Foreign trusts electing to be treated as domestic for Section 2801 purposes.
- Migrated Foreign Trusts: Foreign trusts that become domestic during the year and have prior or current covered receipts.
No filing is needed if the total fair market value of covered gifts and bequests in a calendar year is $19,000 or less (for 2025 and 2026; inflation-adjusted thereafter). However, this exclusion doesn’t apply to migrated or electing foreign trusts reporting prior years. File a separate Form 708 for each calendar year with reportable receipts—do not combine years.
Key Filing Requirements and Deadlines
Form 708 must be filed on a calendar-year basis, listing all covered receipts from that year. Here’s a breakdown:
Due Dates
- General Deadline: The 15th day of the 18th month after the calendar year ends (e.g., June 15, 2027, for 2025 receipts).
- For Covered Bequests: The later of the general deadline or the 15th day of the sixth month after the year the bequest is received.
- Migrated Foreign Trusts: The 15th day of the sixth month after the year the trust becomes domestic (e.g., June 15, 2026, if in 2025).
- Electing Foreign Trusts (No Receipts in Election Year): The 15th day of the sixth month after the first election year.
If the due date falls on a weekend or holiday, file on the next business day. Extensions are available via Form 7004 for up to six months, but this doesn’t extend payment deadlines.
Where to File?
Mail to: Department of the Treasury, Internal Revenue Service, Kansas City, MO 64999. For private delivery services: Internal Revenue Service, 333 W. Pershing Road, Kansas City, MO 64108.
How to Complete Form 708?
The form has several parts:
- Part I: General information, including recipient type and elections.
- Part II: Tax computation (net covered amount minus $19,000 exclusion, times 40%, minus foreign tax credits).
- Part III: Details on covered expatriates.
- Part IV: Schedules for gifts, bequests, trust distributions, and totals.
- Part V: Foreign taxes paid.
- Part VI: Ratio for non-electing foreign trust distributions.
- Part VII: For trusts, prior distributions and U.S. agent info.
- Part VIII: Foreign trustee declaration for elections.
Value assets at fair market value on the receipt date, using estate/gift tax valuation principles. Attach appraisals, trust documents, and foreign tax proofs as needed.
Tax Calculation and Exclusions
The tax is 40% on the net covered amount after the $19,000 annual exclusion. Reduce the tax by foreign gift or estate taxes paid on the same transfer (proportional credit). Standard gift tax annual exclusions or lifetime exemptions don’t apply here.
Penalties for Non-Compliance
Late filing or payment incurs penalties under Section 6651, unless reasonable cause is shown (e.g., due to election issues). Return preparers face penalties under Section 6694 for errors. Always consult a tax professional to avoid these.
How to Download IRS Form 708?
To get started, download the official PDF of Form 708 directly from the IRS website: https://www.irs.gov/pub/irs-pdf/f708.pdf. For detailed guidance, also download the instructions: https://www.irs.gov/pub/irs-pdf/i708.pdf.
Final Thoughts on IRS Form 708
Navigating IRS Form 708 can be complex, especially for cross-border families or trusts. If you suspect you’ve received a covered gift or bequest, review your situation with a qualified tax advisor promptly. Staying informed about these rules ensures compliance and avoids surprises. For the most current updates, visit the IRS website or consult official publications.
This article is for informational purposes only and not tax advice. Always rely on professional guidance tailored to your circumstances.