'Trump accounts' could case a tax headache
By: Medora Lee
USA Today
..... Parents of newborns can look forward to the promised "Trump accounts" in 2026, but if they or others plan to contribute, the can also look forward to a tax heqadache, experts said.
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Trump accounts are savings accounts to encourage children and families to save and build wealth for the many expenses of adulthood. Starting in July, [2026] the government will seed the accounts with $1,000 for all children born between 2025 and 2028 who have a Social Security number, thanks to the tax and spending package passed last summer. [2025]
..... Parents and others may contribute up to $5,000 a year, with employers allowed to contributed half of that cap, into the accounts until the child turns 18.
..... But since individual contributions don't qualify for the gift tax annual exclusion, the donor must file a gift tax return, or Form 709, for each contribution, whether it's the $25 minimum or the $5,000 maximum, experts said.
..... That may sound like a small inconvenience until Americans discover Form 709 isn't generally available on do0it-yourself tax platforms like Turbo-Tax or Jackson Hewitt and may require an accountant, said Amber Waldman, estate and gift senior director in RSM's Washington National Tax practice.
Why is Form 709 required?
..... Contributions to Trump accounts from parents, grandparents, friends or relatives aren't included as part of the annual gift tax exclusion of $19,000 per person because they aren't considered gifts of "present interest." Gifts of "Present interest" means the recipient can access and immediately use the gift. Trump account money generally isn't available until the child turns 18.
..... Educational 529 savings plans were exempted by Congress. when 529s were cerated, Congress explicitly said contributions "shall be treated as a completed gift to such beneficiary which is not a future interest in property."
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Neither the IRS nor Treasury can fix this administratively, Waldman said. Congress would have to act and so far, there have been no such legislative proposals.
..... Failing to file even if you owe no tax still creates risk, she warned. "The IRS can sue an omission against taxpayers in an audit," she said.
..... Americans can file Form 709 by printing, completing and mailing the from to the IRS or file it electronically, typically through an authorized provider or business using the IRS' Modernized e-File system.
..... If taxpayers choose to use an accountant, "the filing could cost more than the contribution itself," Walman said.
Are Trump accounts worth it?
..... Most financial advisers say yes, Trump accounts are still free money.
..... "It's hard not to take free money," said Dan White, founder and CEO of Daniel A White & Associates in Glen Mills, Pennsylvania. "If someone gives you money, don't look a gift horse in the mouth."
..... That may be true of the initial 41,000 form the government, but Americans should weigh all their savings options when it comes to their contributions, experts said.