Is this gift taxable?

[Anonymous]

Anonymous wrote:You performed a service. It is not a gift

This! It is an exchange of services not a gift. If this could work, employers would give gifts rather than bonuses.

[Anonymous]

Anonymous wrote: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?

I think you would have a very hard time proving that wasn’t earned income for a service performed. So you probably owe self-employment tax on that.

[Anonymous]

Why would the IRS believe you that out of kindness you helped 20 kids whose families all had $19k to spend on SAT prep? If you actually want to volunteer to help kids, do it through a nonprofit. And if you want to be a paid SAT tutor, just do it. You won't even have to pay FICA on most of that income, because you'll be over the cap.

[Anonymous]

If the IRS did a random audit of all of your income (they did this once to us) and they found twenty deposits of $19,000 I can assure you they would ask you about it. You’d likely be charged with fraud and it would get very expensive.

[Anonymous]

Anonymous wrote: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.

Yeah, a dead fish in July...

[Anonymous]

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

that's what op doesn't want to pay

[Anonymous]

No

[Anonymous]

Anonymous wrote: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.

This is the right answer. It's not gift taxable, it's 1099 income.

[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.

What a scam. That money was payment for services. One kid you might be able to get away with it. This many is tax fraud.

[Anonymous]

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

Yes. My goodness. We were gifted something worth $50k by a client, we declared it.

[Anonymous]

This seems like some kind of tax collusion with the exact amount of each gift at the gift tax limit. It’s smelly and I would be very careful. That said, you do not need to report the earnings (excuse me, gifts) - the clients (er, uhm donors) do that.

[Anonymous]

Better question is where do you find 20 sets of parents who think SAT test prep is worth $19,000 each.

[Anonymous]

Anonymous wrote:Better question is where do you find 20 sets of parents who think SAT test prep is worth $19,000 each.

+1. I think we are seeing the trees but not the forest. What’s the deal here? I personally think OP is trolling