Tweet

Beware of Gifts That Will Get You On the IRS Naughty List

Guest post by: Michael Rozbruch

Article Overview: This holiday season, taxpayers may want to give gifts to family members or charitable institutions that help them make the most of allowable tax deductions and tax benefits. Unfortunately many people have made mistakes giving in ways that get them on the IRS naughty list. Learn more about how to save on your tax bill while keeping you out of IRS tax trouble with these IRS-friendly gift-giving tips.

Beware of Gifts That Will Get You On the IRS Naughty List

Many individuals and businesses will be considering tax-saving gifts this holiday season. Whether you are making contributions to charitable organizations or making a large gift to a family member, it's important to take advantage of legal tax benefits while making sure your year-end tax saving strategies don't get you in trouble with the IRS. The IRS has a very narrow view of what kinds of gifts are allowable and the government agency catches thousands of taxpayers every year for improper tax deductions. Don't be one of them. With the latest increase in IRS tax collection aggression and the slowly rebounding economy, it's important to keep in mind that the money you "save" from tax deductions is not worth the IRS penalties that you can incur.

If you are unsure about what qualifies as a proper gift, you can get professional tax help from a tax professional. And if you think you may already be in trouble with the IRS, it's important to consider hiring a tax attorney or Certified Tax Resolution Specialist to help you relieve IRS tax problems.

Gifts That Will Put You on the IRS Naughty List #1: Gifts that exceed the IRS's annual exclusion.

The IRS currently allows an individual to gift $13,000 on a family member without incurring a taxable event. If you're married, this means that you and your spouse can combine gifts to total $26,000 to each family member without penalty. The gifts can consist of cash, investments, or property. This can be particularly beneficial for folks looking to minimize their estate taxes.

A gift is defined as giving property or the use of or income from property without expecting something of equal value in return. If a non-cash gift appreciates, its liquidation will trigger a taxable event. For example, if you purchase stock for $10 per share and you give it to a family member who later sells it for $100 per share, income tax would be due on a gain of $90 per share.

If you exceeded the annual exclusion, you needed to file an IRS Form 706. If you didn't file the appropriate form with the IRS, you will want to consult with a professional tax attorney or Certified Tax Resolution Specialist to help you obtain tax relief.

Gifts That Will Put You on the IRS Naughty List #2: Contributions to an account in a child's name that aren't a UGMA/UTMA account (within the annual exclusion).

An UGMA/UTMA account is an investment or savings account in a child's name. These funds can be used in the future to help pay for any number of financial hiccups like college, a wedding or buying a house. The account can consist of savings accounts; Series EE U.S. Savings Bonds and individual securities such as stocks, Treasury bills, zero-coupon bonds or mutual funds. One adult acts as custodian. If you are the custodian of your own gift, the account will be considered part of your estate.

Depending on the size of the account, you will need to lend tax help and complete a return for the minor. The first $950 per year of investment income is tax-free. $951-1,900 in unearned income is taxed at the child's rate. Beyond $1,900, the income is taxed at the higher of the child's or parent's rates. For individuals over 18, all unearned income is taxed at his or her rate. When the child reaches their majority as defined by each state's law, the money belongs to them free and clear. Regardless of your intentions when you gave it, recipients can spend their money as they like.

If you have created accounts that don't follow these guidelines or have exceeded the annual limits, you will want to consider getting professional tax help to resolve any resulting back taxes or IRS problems.

Gifts That Will Put You on the IRS Naughty List #3: Gifts to close friends who are not your spouse.

Playing house isn't the same as being married in the eyes of the IRS. Anything you give to your legal wife or husband is not subject to the gift tax rule. In fact, you and your spouse can both give separate gifts to the same person, doubling the exclusion limits. When you split gifts, you won't owe a gift tax payment, but you must report the gift to the IRS using Form 709.

If you didn't cleave to the IRS's rules and you're in trouble, it's best to consult with a tax relief expert or Certified Tax Resolution Specialist to help bring you into compliance.

Gifts That Will Put You on the IRS Naughty List #4: Nondeductible payments for a person's medical and educational costs.

If you pay for the medical care of a family member or someone's tuition, you must write the check directly to the institution. These payments are not included in the gift tax rule, and if these are the only gifts you've made, you don't have to file a Form 709.

If you have paid someone's medical or educational expenses by giving money to the individual, you may find yourself under IRS scrutiny and should consider contacting a back tax attorney or Certified Tax Resolution Specialist.

Gifts That Will Put You on the IRS Naughty List #5: Unallowable political donations.

Cash gifts made to political organizations are tax free as long as they are registered with the IRS as a 501(c)3. If the group isn't registered with the IRS and your gift exceeds the allowable limits, these improper deductions may cause you to become IRS audit fodder and you will need the assistance of a back tax attorney or Certified Tax Resolution Specialist.



Gifts That Will Put You on the IRS Naughty List #6: Unallowable charitable donations.

The same is true of donations to charitable organizations. Check to make sure that the organization you are interested in donating to has the appropriate IRS designation. A portion of these gifts may be considered deductible charitable contributions.

If you have run afoul of Uncle Sam, an experienced tax attorney or Certified Tax Resolution Specialist will be able to provide expert tax help to ensure that you get tax relief from back taxes, IRS audit or other collection-related issues.

Note: Always keep your checks and receipts to substantiate your deductions. You never know if/when the IRS will audit you and you do not want to be caught in a position where your truthful deductions are not accepted based on a lack of proper documentation.

Related Articles
  Surviving Shift Work – When you’re Rostered to Work on Christmas Day!
  3 Naughty Online Business Ideas
  Positive Thinking – Appreciate What You Have In Your Life
  DoubleClick or Double Cross? You Decide.
  Build Your List with Joint Venture Giveaway Events
  3 Steps to Find “Freebies” to Add to Your E-book
  The Holidays are a Great Metaphor for Sales Success
  Feeling Beautifully Connected in My Isolation
  Saving Money During the Holidays
  The Real Definition of Keywords
  SMEs and Client Gifts – should we or shouldn’t we?
  Shopping Online for the Holidays
  Yes, Smart Women are Unique!
  'Tis the Season for Holiday Networking - And Here's Your Guide
  Self-Coaching Tip: Community is the Place Where Your Gifts are Received
  Small Businesses Get BIG Results With Business Gifts
  Did you really get what you wanted for Christmas?
  Does Your Domain Name Have a Dirty Secret?
  What's Under Your Tree?
  The Advertising Scam: New Entrepreneurs Beware!

Article Tags: back taxes, certified tax resolution specialist, installment agreement, IRS payment plan, IRS tax relief, tax attorney, tax help



Related Forum Posts
Re: Buy An Established Affiliate Marketing Website - Hi David and GT, thanks for posting this here. My site is going for way below value and will be a great deal for someone. The links provided are a great resource for anyone looking to buy and sell websites. The Internet is all about information and you can know what you are getting before you buy. It's a little better than days past where it was "Buyer Beware". Steve
Re: Email autoresponder messages: what delivery intervals? - Sub-lists are primarily created around the products I own. If my list A was about one topic, I will not promote anything to that list about another topic until I first have them opt-in to another list. Example of this is, let's say you were interested in internet marketing and you opted-in to a list for driving traffic (List A). I will not send information about product creation tips to that list unless I first have you opt-in for another list (List B). These two may be close enough so that might not be an issue, but what I find is most internet marketers drive all their promotions to their one and only list they own. So one day, it's about teaching mom-pop offline businesses about marketing, another day about oh let's market on Facebook, next day about, hey I found great product on promoting stuff on Mobile or cell phones, next week, let's talk about Amazon's Kindle, then Pinterest... You get what I mean. If I have to do above, it will be after subscribers decided not to buy any of my own products. Then I will send other promos to that list. But I think by minimum, it's good to create sub-lists for buyers of your own products so that you can send more advanced and higher end items exclusive to that list.
Re: How do you make the most of your day? - Here are a couple things I do to get lots done. First, I work from a weekly To Do List (although I should call it an Action List) rather than a daily list. Each item on the list must be one specific action required to move one step closer to accomplishing or finishing something. It's similar to what Robert Alan talks about. Each day I prioritize 3 actions that must be completed before the end of the day. I fully commit to those actions. Second, when I really need to focus on something to get the most done possible I work in timed 50 minute increments. That may sound a little loopy but it really works for me plus I feel refreshed working that way. So I literally have a little timer on my desktop that I set to count down from 50 minutes to zero. During that 50 minutes I work without interruption. When the timer goes off I stop whatever I'm doing and take a 10 minute break. You can get an incredible amount of work done working that way without feeling like you're working hard. I don't schedule 8 of those 50 minute time periods because there isn't a need to plus I'm sure you would wear out if you did. If you haven't tried this you might want to give it a try setting just two 50 minute time periods for a couple days and fiercely keeping them without interruptions to see what I mean. I'd love to hear about your experience and any other kind of quirky things that work.
Re: Social Bookmarking Site List - Good List - over time these resources will be weeded out though . . . look for the tools that are more used to organize, well, tools. Addthis has done a great job of that - its like everyone inventing the wheel at once sometimes however.
Re: History of Women in Business in the United States - Yes. Women have increasingly made positive economic contributions to society and their position is being recognized more and more as seen on the Forbes List of Executive Women. In general, women can be a bit more practical in their approach as entrepreneurs too.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

The Death of the Sales Magazine

Top 5 Tips for Better Online Ads

How To Calculate A Minimum Fee For Your Services

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.