Is this gift taxable?

[Anonymous]

If you volunteer your time to privately help twenty students for SAT/ACT prep and they all perform exceptionally well on the exam, and their parents give you a gift of $19,000 each—totaling $380,000—do you need to pay taxes on that $380,000?

[Anonymous]

The receiver of the gift is not paying any gift tax.

The giver of the "gifts" will likely need to file a Form 709. It's really a gift of 380k, not a bunch of 19k gifts. Whether or not they end up needing to pay tax as a result of these transfers is not something the person who receives the "gifts" needs to worry about. The gift-giver won't need to worry much about that either if they aren't ever going to be transferring more than 13.99M via gifts or at death. I'm guessing given this incredibly generous "gift" (it's one ... not multiple ... c'mon) here for this, that they will, though.

I'm going to question whether or not this is "gifts" or compensation, though. I would think that in this scenario the giver isn't having to file form 709 because they didn't gift anything ... they paid someone. Seems like a lot of money for SAT prep, to me (and I taught SAT prep).

Whole thing is fishy as hell.

[Anonymous]

I like how all the parents, independently or maybe not so independently, came to the same amount of $19k as a gift. There is an SAT question in there somewhere (What are the chances that 20 random parents all decided on giving their volunteer tutor the same amount of token appreciation? What are the chances that that token appreciation was in cash...cash cash, not check? What are the chances that the show of appreciation was a 5 figure sum? What are the chances that the volunteer wasn't an actual volunteer? Etc, you get the point).

[Anonymous]

IRS might decide it is not gift but self employment and you pay taxes and penalty. Kid who ratted you out gets 10% of what they collect.

[Anonymous]

In this scenario, you are clearly trying to structure compensation as a "donation." Given the state of the IRS today, you could probably get away with it but it's definitely illegal.

[Anonymous]

Anonymous wrote:IRS might decide it is not gift but self employment and you pay taxes and penalty. Kid who ratted you out gets 10% of what they collect.

IRS will most certainly "decide" this. At the very least. And they could "decide" a lot more with this arrangement, OP. Get a good accountant and freaking do what they say. If not ... this reeks of FAFO.

[Anonymous]

You’re supposed to declare income anyway. You don’t pay gift tax, but you pay income tax.

[Anonymous]

This is called tax fraud, it's not complicated.

[Anonymous]

The answer is always "yes you must pay more taxes" as that is the nature of it all.

[Anonymous]

Don't be surprised if one of the 20 parents turns on you and reports you to the IRS. you are making nearly $400K in income and you're trying to collect it tax free. You're a fraud.

[Anonymous]

If the IRS asks how each family came to decide on the same amount, how will you explain it?

[Anonymous]

You performed a service. It is not a gift

[Anonymous]

This is obviously schedule C self employment income. Best of luck to you.

[Anonymous]

A scam is a scam, not a gift.

[Anonymous]

Anonymous wrote:

Anonymous wrote:IRS might decide it is not gift but self employment and you pay taxes and penalty. Kid who ratted you out gets 10% of what they collect.

IRS will most certainly "decide" this. At the very least. And they could "decide" a lot more with this arrangement, OP. Get a good accountant and freaking do what they say. If not ... this reeks of FAFO.

“Structuring” payments to avoid tax and IRS reporting is a crime.