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Merlo
Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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We are setting up a benefit for someone with cancer to raise

Resolved Question:

We are setting up a benefit for someone with cancer to raise funds for medical expense. What legal things have to be done to protect money from taxes etc and how should account be set up? Also do we have to have a tax number. Funds will likely be ten grand or less. Thanks
Submitted: 5 years ago.
Category: Tax
Expert:  Merlo replied 5 years ago.
HelloCustomer

Any contributions that you receive for this person will be considered by the IRS to be gifts. Gifts are not taxable income to the person receiving them, and the donors are not required to report gifts which are less than $12,000 to the same person in one year. Since the contributions are not being made to a qualified chartiable organization, the contributions will not be allowed as a charitable tax deduction for the donors.

The best way to handle funds received for this purpose would be to set up an escrow account with your bank where you deposit all of the contributions received. A check may then be issued at any time to your recipient.

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Thank you.


Customer: replied 5 years ago.
I am not sure if this is helpful because I do not know what is entailed for an escrow account. The banker told the husband he would need a DIN number etc. The person ith cancer is on social security etc. Not sure how to protect these funds
Expert:  Merlo replied 5 years ago.
Hello again weasels,

An escrow account is nothing more than an account which is put into the custody of a third person. In other words, instead of your donors giving money directly to the person with the cancer, the money is paid to the escrow account, and then eventually distributed. Like all bank accounts, the escrow account will need to be associated with an identifying tax number, but this can simply be your own social security number. You can apply for a separate taxpayer identification number (TIN) if you wish, but it is not necessary. There will be no tax consequences to you and no reporting requirements necessary for maintaining such an account.

As far as the person receiving social security benefits, this will not affect his benefits in any way. Gifts that a person receives are not reportable income by the recipient. The only time a gift is reportable is when the donor gives more than $12,000 in any one year to the same individual. Even then, the donor is the one required to file a Gift Tax Return to report the gift. But the gift itself is neither a tax deduction for the donor nor is it reportable income by the recipient.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you.
Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Merlo and 5 other Tax Specialists are ready to help you

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