Advice on reporting cash gift

- A
- ataxquestion
  
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posted
15 years ago

Wed, Feb 4, 2009 10:23 PM

Say someone got a cash gift of say $1000 in 2006, $4000 in 2007 and didn't report it, unaware they were supposed to treat it as income. Now they're concerned this could come back on them and wants to amend their return for those years.

Is there a way to know what the interest/penalties could potentially be on this? Or is it at the discretion of the IRS?

Also of concern are other possible problems it could cause. If one's sibling also got a cash gift, is the IRS likely to look at them as well once they've been alerted that one of them has gotten this gift? Would doing something like this cause the IRS to put one on some kind of scrutiny list or the like? Will they just take your word that this is how much the gift was? In one case a photocopy of the check was made before it was cashed, in another case it wasn't. Neither was deposited.

What do you see as the realistic up side & down side of just forgetting about it and not doing anything about it?

Thanks

- S
- Stuart A. Bronstein
  
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posted
15 years ago

Wed, Feb 4, 2009 10:29 PM

Normally gifts are not deductible by the giver and are not taxable to the reciever.

On the other hand if it appears to be a gift but is really related to business or supplying services, it will be taxable. For example tipping the wait staff in restaurants. It's completely voluntary so it seems like a gift. But it is related to performing work, so it's taxable.

If it's a real gift, you don't have to do anything. If it's not, be careful.

Stu

- P
- Paul Thomas, CPA
  
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posted
15 years ago

Wed, Feb 4, 2009 11:24 PM

wrote

Gifts aren't considered income and are therefore not subject to income tax.

- B
- Bill
  
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posted
15 years ago

Fri, Feb 6, 2009 5:52 PM

snipped-for-privacy@yahoo.com posted:

A true gift is never taxable to the recipient. But note the word "true." If you have a business relationship with the giver, then the gift may be considered a bonus or supplemental side benefit, and therefore be taxable.

Headlines have been made within the past week by famous folks who overlooked gifts of significant value that were related to their business functions.

Please note while the recipient has no tax consequence, the giver may have to file a report if the gift is greater in value than $13K (as of the year 2009, and subject to change).

Bill