gift tax?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Is it "legal" to provide "expensive" music lessons for free to kids and the grandparents just write the music teacher a 15K yearly gift? What will happen if twenty grandparents, uncle or aunt of the kid does that, will it raise a red flag with the IRS? Moral issue aside, is it legal?

When a gift is payment for services it is not a gift but rather tax fraud.

Again, moral issue aside, how is it "tax fraud" if the grandparents are NOT the one receiving lessons?  The grandparents are NOT claiming the child as dependent.  They just give a 15K gift to the music teacher.  Is it legal?

Legally, they can gift anyone they want (outside household employees) annual gifts of $16K.

[Anonymous]

Each parent can gift you 16K and your DH 16K (so 32K each) without it applying to the lifetime exemption. They need to file a gift tax sheet on their taxes to show a split gift.

As others have said, they can give money to your kids in the same scenario, but that is off limits to you. It would be a gift to your kids and can't be spent on things you are meant to provide as parents (housing, food, medical care, basic education).

[Anonymous]

Anonymous wrote:I also have a question about gift tax.  Let say twenty different strangers each give me 15K/yr in gift tax for a total of 300K, do I have to pay tax on the 300K gift tax that I receive?

Great question. This must happen with some of those online fundraisers.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I also have a question about gift tax.  Let say twenty different strangers each give me 15K/yr in gift tax for a total of 300K, do I have to pay tax on the 300K gift tax that I receive?

Great question. This must happen with some of those online fundraisers.

Givers of gifts can give 16k per year to any individual without paying taxes or filing paperwork. Beyond that they need to file paperwork but do not owe taxes until they exceed the lifetime gift allowance of 11.7M.

Recipients of gifts never have to pay taxes. Recipients of payments for services or good do need to pay taxes since despite what you call them the IRS does not consider them gifts. So the music teacher cannot claim the money from the grandparent to pay for lessons was a gift. In terms of go fund me type things. The person giving the gift does not need to pay taxes. If the gift is to someone to pay their legal bills, the Recipient does not have to pay taxes, but the lawyer that ultimately receives payment for their services would. If the gift is to a lawyer so that the lawyer can defend someone else, then the IRS would likely consider that payment for services.