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Thread: Gifted Income - need ideas for taxes

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    Default Gifted Income - need ideas for taxes

    Hopefully Mel or someone else can give some advice.

    I am receiving a lot of gifted money in my New York State bank account, from one person. I want to somehow claim it on my US taxes as income so I can qualify for a mortgage for a winter condo in Florida.

    The payor has exceeded his annual gift allowance but not his lifetime allowance. Everything after the first $24k comes in cash deposits to my account. I don't want to cause him an audit by doing anything wrong. And if he declares the full value of the gift on his returns, it might cause problems at home for him

    I am trying to think of a way to claim this as income, and just pay tax on it so it's 'legitimate income' which I can use for a lender.

    I was thinking of claiming to be some kind of consultant. If you have any ideas please let me know.

    Whats a cash business with no records that a non-resident non-citizen could hypothetically own?
    "Women have been leading men on to get rich quick since the beginning of time. The system is older than dirt. Don't be a player hater." - me

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    Default Re: Gifted Income - need ideas for taxes

    From the details that you provided, it sounds like there's really only one option here. He should issue you a 1099-MISC for the total amount of payments made to you during 2012. This eliminates the 'gift tax' problem for him, eliminates a 'verifiable income' problem for you, and greatly reduces the probability of an IRS audit for both of you.

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    Duh Re: Gifted Income - need ideas for taxes

    Quote Originally Posted by Melonie View Post
    From the details that you provided, it sounds like there's really only one option here. He should issue you a 1099-MISC for the total amount of payments made to you during 2012. This eliminates the 'gift tax' problem for him, eliminates a 'verifiable income' problem for you, and greatly reduces the probability of an IRS audit for both of you.
    Can he file the 1099 separately or after his taxes are filed? Because I think he and his wife file taxes together and so she would see it and have a bird.

    The 1099 seems to treat the income as compensation so I assume it's taxable at regular non-resident alien rates, but since it's non-employee comp I'm not sure if I could deduct anything. I think the total number is around 100K for 2012 so unless I can write off expenses somehow I'm going to have a $28k+ bill. And I don't even get standard deductions since I'm non-resident alien.
    "Women have been leading men on to get rich quick since the beginning of time. The system is older than dirt. Don't be a player hater." - me

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    Default Re: Gifted Income - need ideas for taxes

    You seem to want to have your cake and eat it too. If it's income, then it's taxed. The U.S. taxes income, not wealth. (The states tax wealth and income.) If it is really a gift, it is not taxed to the recipient. You cannot really have it both ways.

    Z

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    Default Re: Gifted Income - need ideas for taxes

    ^^^ and if you attempt to treat this amount of money as a gift, it is guaranteed that your SD will be subjected to a huge amount of US 'gift tax' ( the IRS annual limit for non-taxable 'gifts' is only something like $13k ). It is also very likely that both you and your SD will be audited by the IRS if a six figure amount is claimed. And with a six figure amount involved, in combination with your SD filing a joint tax return, it's also a distinct possibility that the IRS will deem the money to be 'payments for services rendered' thus subject to income tax on your part.

    And in point of fact, if the $100k amount of 2012 'gifts' is treated as income, the tax picture will look something like this, assuming $20k in personal exemptions and deductions ...

    $80k * .153 social security tax = $12k
    $80k * .210 US federal income tax = $17k
    $80k * .075 NY state income tax = $6k

    thus total taxes due would be in the $35k ballpark minimum, more if you live in the NY city area where a city income tax also applies, and more still if your non-resident alien status renders you ineligible for various standard deductions and tax credits.

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    Default Re: Gifted Income - need ideas for taxes

    if you're getting gifted $100k a year, why not buy the FL condo in cash? FL real estate is cheap. you could always wait a few more years and save more if needed.

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    Default Re: Gifted Income - need ideas for taxes

    Mel, I think the donor is taking the gift in excess of the annual limit against his lifetime limit. Thus, he does not owe taxes until he reaches the lifetime limit. The OP still has a problem though with trying to re-characterize the gift as income. That would subject her to a tax liability and it might cause the IRS to reconsider the donor's original characterization of the sum as a gift. The service might accept her re-characterization of the amount as income and assess taxes accordingly. Then they would disallow the gift tax return and treat the sum as a payment for which they do not allow any corresponding deduction. A lose - lose situation.

    Z

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    Default Re: Gifted Income - need ideas for taxes

    Quote Originally Posted by Zofia View Post
    You seem to want to have your cake and eat it too. If it's income, then it's taxed. The U.S. taxes income, not wealth. (The states tax wealth and income.) If it is really a gift, it is not taxed to the recipient. You cannot really have it both ways.

    Z
    If you take the time to read what I wrote, I said I was willing to pay tax on it. I'm not sure why you think you need to dumb it down to "If it's income, then it's taxed". Duh.

    I was complaining that I don't get standard deductions.

    The giver never gets a deduction for giving money so that's not a problem. We're still under the lifetime limit so that's ok too.

    Also Mel the 12K limit is x2 if you are filing spouse returns so it's actually $24k/year for the guy I'm talking about. You're point is still a good one, I'm looking at $35k taxes if I try to claim it as income. Closer look at my expenses shows $35k in travel expenses to NY this year (somehow I'm still not SuperElite status with Air Canada but that's another rant). If I could deduct all my travel and a handful of other things the amount owing would be somewhat less, but not too much.

    I'm thinking of driving to Niagara Falls NY and just meeting with an accountant to get some advice.
    "Women have been leading men on to get rich quick since the beginning of time. The system is older than dirt. Don't be a player hater." - me

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    Default Re: Gifted Income - need ideas for taxes

    Quote Originally Posted by LuvlyDancer View Post
    I'm thinking of driving to Niagara Falls NY and just meeting with an accountant to get some advice.
    That's probably going to be your best bet, especially given the special circumstances surrounding your situation. I bet have a chat with your SD too as he might be able to advise.

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