CPA with extensive experience in small and mid-market business. I enjoy estate tax law and tax planning for both individuals and businesses. I definitely found my calling.
If it was a discounted commission that was negotiated then it is not income to you. But, if the realtor charged 3% through closing and then gave you 2% as a payment, then yes, this should be claimed s other income on your tax return.
1 year, 2 months ago on Gift Tax: Do I have to pay gift tax when someone gives me money?
@andy1m@Andrea Ward CPA
You aggregate the gifts from foreign persons that are related (for instance a mother in law and a brother in law). If the aggregated gifts exceed $100,000, it is reported on the 3520. This is an information return that the IRS requires. So, it is by the donor that determines the reporting, not the recipient.
The funds from your brother is not taxable since it would be a gift. But since it is over $14,000 and he would be a resident alien, he should fill out a gift tax return to let the IRS know this (it won't cost him any "real" money until he gives more than $5,340,000 total during life and at death).
And later when you gift him the house, if the equity is over $14,000 you would have the same obligation to report the gift of equity to the IRS too.
Yes, you can claim the interest if the statement is in you or your spouse's name and SSN. The source of the funds used to pay off your loan is a nonissue here.
I would suggest you make a note on your deposit slip that says where the money came from and then also ask your mother in law to write a letter (even if in Korean) to say that she is giving you $50,000 as a gift. Then if IRS were to audit, you would have proof to back up the deposit.
The IRS requires that you aggregate all the gifts you receive from overseas. So, if you got a gift from your wife's mother who is in Korea and then another individual who is outside of the U.S. during the same year, you would add them together.
If the total you received from individual who are overseas is less than or equal to $100,000 then you do not have to report the gift to the IRS using Form 3520. The receipt of the gift from a foreigner is never taxable to you as the recipient, just possibly reportable. Just as an FYI to you, if you ever do receive over $100,000 from individuals who are overseas in a year, you really need to fill out the 3520 because the IRS imposes penalties if you fail to do so.
This is your lucky day if you get $20 million from a person as a gift because gifts are tax free to the recipient. However, your friend will be filing a gift tax return since she gave you more than $14,000 and having to pay the government on the excess amount over the $5.34 million that can be passed through life or death in 2014.
1 year, 3 months ago on Gift Tax: Do I have to pay gift tax when someone gives me money?
You are allowed to give a person up to $14,000 per year before you have to report the gift to the IRS on Form 709. If I understand your question correctly, you are asking if you could double it like a couple can. The answer is no, you are not allowed to do this without report the excess over $14,000 to IRS. But, the other parent can give the child $14,000 in addition to your $14,000.
Unfortunately gifts are not tax deductible by the donor. And giving your child $14,000 is a gift. However, if the student loans were in your name and you were to pay the loan company instead, you may be able to deduct the student loan interest up to $2500 in 2013 as long as your adjusted gross income does not exceed the limit for your filing status.
You brother reports the gift on Form 709 which is a merely a tally form until he gifts more than the limit. After he passes the limit, then he or his estate will have to pay money for passing property by gift or inheritance. In this case, $90,000 - $14,000 = $76,000 that counts towards the $5.25 million that he can give during life or after death.
1 year, 4 months ago on Gift Tax: Do I have to pay gift tax when someone gives me money?
But please understand that you are allowed to give through life and death a total of $5,250,000 in 2013 tax free. The Form 709 is used to keep a tab on how much was gifted above $14,000 in a year and then is used if a decedent's estate qualifies to file the Form 706 because their estate is over the threshold.
Most people do not accumulate enough to need to file Form 706, so the Form 709 that is filed, while mandatory, normally never amounts to more than a paper push.
1 year, 5 months ago on Gift Tax: Do I have to pay gift tax when someone gives me money?
Not if you are the recipient.
As a US taxpayer you will not have to pay tax on the gift you received. But since it is coming from overseas, you may need to fill out Form 3520 which is an information return with IRS. Not sending in Form 3520 could result in penalty.
The government's position is that all income received is taxable, even barter income. But because it is hard to trace, the issue is only caught in an audit if it is missed. Travel miles awarded to employees has been discussed for years to be taxable compensation for businesses who pay for the airline ticket and allow the employee to keep the miles. But I have never seen a client bring in a separate form for taking his reward points and using them to lower his credit card balance or to buy anything. So, while legally it may need to be reported, I have not seen the IRS audit, or even pose an inteview question in an audit, related to this.
1 year, 7 months ago on Will Credit Card Rewards Soon Be Classified as Taxable Income?
I think I hear this exact question from at least 2 clients per month. Most of the time a parent is worried that if they give a sizable gift to his/her child that the child will owe tax. When I tell them that it is the parent as the giver of the gift who would be the party with tax responsibility and not the recipient, which is the child, they are surprised. Or, the flip side is that the parent wonders what tax savings would be yielded by gifting, and he or she hears me tell them that there is no tax deduction for gifting, if anything the parent may be owing tax for giving a gift. But in reality, you are allowed to give up to $14,000 per year to an individual as a gift without needing to report to the IRS. Further, I explain that you are allowed to give away in 2013 $5,250,000 total through gifts or inheritance at death. So, I ask the client if they even have $5,250,000 to give away and most do not. Then I explian that while any gift over $14,000 has to be reported to IRS, that this form may never amount to any actual money being paid to IRS because it is only after your $5,250,000 is given away in life and/or death that there would be any payment. But you want to file the gift tax return just in case you are lucky enough to hit the lotto in the future.
1 year, 7 months ago on Gift Tax: Do I have to pay gift tax when someone gives me money?