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Irs Gift Taxes
Floyd Said:How would I verify the gift status of an employer home purchase grant with the IRS?
We Answered:This is taxable income and has to be included on boxes 1,3, and 5 on your Form W-2. There's no such thing as a tax-free employer gift or grant for purchase of a home (or for any other purpose for that matter). It's just more wages or salary as far as the IRS is concerned.
If your employer didn't include the amount in your W-2 he must issue a corrected W-2 that includes the "grant."
Edward Said:How much can a one time cash gift be without either party owing taxes and are the banks required to report it?
We Answered:You don't pay taxes on gifts you receive.
People giving large gifts have to deal with a gift tax, but only if the amount given to a single individual during the year exceeds what the IRS calls a gift tax exclusion amount. This amount changes each year, but in 1996 it was $12,000.
In 1996, a generous individual could give any number of people up to $12,000 EACH without having to pay a gift tax. A generous individual's spouse could also give equal gift amounts to those same recipients (essentially doubling the gift), without having to pay a gift tax.
Generous givers can also give to a gift recipient's spouse, so in reality, one couple can give another couple up to $48,000 per year without concern about the gift tax.
In addition, gift giver's payments made directly to schools and hospitals for tuition and medical expenses are exempt from the gift tax rules.
There are certain rules for people giving away lots of stuff during their lifetime that will affect the Estate Tax when they die, but if your annual giving doesn't exceed the limits, then you (or your estate) won't have to worry about the Lifetime Exclusion amount.
Everyone (even car dealers) is required to report cash transactions over $10,000. If you make several cash deposits at a bank during a short period of time (up to a couple of weeks) that total $10,000, the bank will report that, also.
It's also a crime to split a cash transaction into multiple transactions to avoid the $10,000 reporting limit.
Banks are also required to submit a Suspicious Activity Report (SAR) on all suspicious transactions (which means anything out of the ordinary). Suspicious reporting begins at the $5,000 level.
For people receiving gifts, it is always a good idea to keep track of where money you deposit in a bank comes from. When you deposit those gift checks you receive, itemize them in your checkbook, like this:
- deposit - birthday money from grandma $10,000
- deposit - Christmas money from grandpa $10,000
- deposit - graduation gift from mom & dad $20,000
If you are ever audited by the IRS, you want to be able to show where this money you have that they didn't tax you for came from.
Annie Said:If I give my child a cash gift, to I included it in my income on taxes?
We Answered:You answered your own question. Your income is $50K. You GAVE money to your child.
The IRS runs a cross-matching program every year. The income reported on W-2s and 1099s is compared to the income reported on tax returns. If you were to report $40K, on your 2009 tax return next spring, sometime in the spring or summer of 2011 you will receive a notice from the IRS assessing taxes and interest on the $10,000 you left off your tax return.
Depending on the age and income of your child, he or she may have to file a tax return if the earnings on the gift is high enough. The gift itself isn't income.
I hope this helps.
Dan Said:Will my mother have to pay gift taxes?
We Answered:As bostonianinmo said, the mortgage company documents don't really matter. The title is what is important. If both names are on the title, you should be fine. If only your name is on the title, I recommend consulting with and attorney to see if you can change the title and avoid any tax consequence. The sooner you do so, the easier it will be to convince the IRS that was your original intent. Worst case, she will have to fill out a gift tax return. If she has not used her unified credit, she can still avoid actually paying gift tax. This does reduce the amount of her estate that is exempt from taxes. That may or may not be an issue, depending on the size of her estate.
Virgil Said:IRS got 1099 on a Gift Trust I cashed in. Taxes were paid on interest but 1099 includes principal. What's up?
We Answered:Because you received a 1099-B, this income should have been reported on a Schedule D. The amount indicated on the 1099-B, would have been the sales proceeds amount. The cost of the investment should have been included on the Schedule D as well. That cost would be 200 x 12 x 10. You should be effectively paying taxes on the different, at long term rates.
I would suggest filing an amended 1040 X reflecting the cost not previously reported.
Adrian Said:Instead of paying gift taxes loan out money with money repaid?
We Answered:Doing what you are suggesting is one way to ensure that the IRS will ask questions later if no tax is paid.
If you loan money, then you must pay tax on the interest that you charge.
If you loan money and do not charge interest, then you must pay tax on the imputed interest, which is the amount of interest that you could have charged if you did charge interest.
The only way to avoid paying tax is to give the money as a gift, and not as a loan.