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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10482
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Someone has been giving me a gift of $30,000 a year years,

Customer Question

Hi,
Someone has been giving me a gift of $30,000 a year for several years, and the gift is given through a company he owns. However, it is a gift because I have never done any work for his company + he tells me it's a gift to help me pay bills. He reports it as income on a 1099.
However, I now owe the IRS over $23,000 in back taxes, and I don't think it's fair because soon after doing 2015 taxes I will owe over $25,000. And the IRS wants a break down of everything you own if you owe over $25,000.
Is there a way for me to report it as a gift even though I have gone along with the gift giver for several years and reported it as income.
If I go back to the IRS and try to report it as a gift will I be penalized or possibly sent to jail?
The reason I don't have the money for the taxes is because I have been living on the money given to me as a gift, and it takes everything given to me to live.
Hopefully, this question makes sense...
Thanks,
Ron
Submitted: 7 months ago.
Category: Tax
Expert:  Lane replied 7 months ago.

Hi Ron,

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It does make sense. What you'll need to do is respond to IRS with exactly what you've said here.

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The issues you have to overcome are as follows:

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(1) His reporting on a 1099 does NOT indicate that HE thinks it's a gift. He is either completely misguided OR is treating this as payment for services (which is what the 1099 is for) so that he can deduct. This deduction being taken on his end is likely the reason IRS is treating it as income to you.

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(2) If you can get something in writing from him that this is a gift it will certainly help your case.

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(3) IRS' definition of a gift is exactly what you've said here ... something given without the expectation of ANYTHING in exchange.

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(4) What he should have been doing every year, if he believed it was a gift is filing form 709 (gift tax return). Although gifts tax (a transfer tax, paid by the giver) are not taxable until the giver has given away over $5,450,000 during their life, the gift tax form has to be filed by the giver time that more than 14,000 (the annual gift tax exclusion) in a year to one person or entity ... to track against that $5,450,000 lifetime exclusion.

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Bot***** *****ne, anything you ca do to show that this was a gift, that nothing was done FOR the gift, and that you were told by the giver that it was a gift will help.

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Please let me know what questions you may have from here.

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lane

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I have a law degree, with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance & tax, as well as CFP and CRPS designations. - I’ve been providing financial, Social Security/Medicare, estate, corporate, both for-profit and non-profit, and tax advice on three continents, since 1986

Expert:  Lane replied 7 months ago.

Hi,

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I’m just checking back in to see how things are going.

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Did my answer help?

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Let me know…If not let me know how else I can help ... If so, would appreciate a positive rating so that I can be credited for the answer

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Thanks

Lane

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