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Gifting Retro Pay Possible Tax Consequences

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Tbird

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here's a question and i'm just not sure what the answer is, anyone out there want to take a stab at this?

if you receive retro pay, non-taxable to you, and then you in turn gift it to someone else, will that person then be responsible for taxes on that gift?

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Don't trust the IRA and the banking industry...Give each 9,999.99 in each day so the bank doesn't turn it into IRA to investigate. Once you give them 10,000.00 the bank noffys IRS then they start investigating. It turns into a big mess.

So give under 10,000.00 one time each day 9,999.00 is ok then next day 9,999.99 for however many days you want but never 10,000.00 or more in one day. Be smart and safe. We got screwed as well as uncle did 2x and in-laws did too.

Don't try to give 9,999.99 to more than 1 person a day too.

Sorry, but your logic is wrong. Any large amount of sum/money, even if it is below the federal guidelines, if deposited on a regular basis, is subject to be reported to the IRS or Feds. In the past, it may have been so, but today with terrorism abound, large sums that are even less than allowed may be looked at. If the IRS thinks you are trying to surcomvent their rules, they may audit you and if they do anything, you are the one who has to prove them wrong and they may well cost you all that you have to fight them.

Check with the IRS and get it in writing as to what you can legaly give as a gift, then you will know positively where you stand. The IRS is the last agency you want to try and fool with.

Rockhound Rider B)

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My logic is not wrong...We took 40k out of the bank one day and within a month we heard from the IRS and the State and had to pay taxes on this as the bank said anything over 10k withdrawal is reported to IRS and the State...My uncle did this 2 yrs ago and took out 16k one day and then 10k within the same mth and too the bank notified the State and IRS and taxes had to be paid.

Less than a yr ago my father-in-law gave someone 10k and he received notification to pay taxes on this and also from the State too.

The IRS does have a reg whereby an individual can give 12k to a person as a gift but when you take the 12k out of your acct you have to pay the taxes...the bank told us all 9999.99 is not reported to the IRS nor State, but as soon as it is 10k or more it is.

We all got stung...Paid taxes out the wazzo to IRS and State too.

First we paid 10% to IRS then got taxed again 10%. I know from experience, it happened to us, but I am saying be leary and check it out. Call the banking institution...Better be safe and not have to pay more on what you saved.

This was not comp. money. But still too much cash out of bank puts up red flags when withdrawn.

If you are married you can each gift 12k to the one person and that is still a taxable gift to that person but then you need to file Form 709 as this is called gift splitting. You two pay the tax and the person it was given to does not. Our banks were trying to save us from paying tax with the withdrawl of 9999.99, and knowing over 10k is reported...so if you gift someone 12k as one person it will be reported to IRS and State by bank so you will pay taxes on that, but not the giftee.

Another interesting general rule is any gift is a taxable gift however, here are some exceptions:

Tuition or medical expenses you pay to a medical institution or an educational institution for someone;

Gifts to your spouse;

Gifts to political organizations for it's use;

Gifts to charities;

Gifts, excluding gifts of future interests, that are not more than the annual exclusion for the calendar year. No taxes paid by anyone on these gifts.

So gift up to the 12k individually to someone and they get it tax free but you pay taxes on it( but how my bank told us like 6k one week and 6k the next are not reported to the IRS so I guess 0 tax. As it looked like $ spent.

Edited by halos2
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My logic is not wrong...We took 40k out of the bank one day and within a month we heard from the IRS and the State and had to pay taxes on this as the bank said anything over 10k withdrawal is reported to IRS and the State...My uncle did this 2 yrs ago and took out 16k one day and then 10k within the same mth and too the bank notified the State and IRS and taxes had to be paid.

Less than a yr ago my father-in-law gave someone 10k and he received notification to pay taxes on this and also from the State too.

The IRS does have a reg whereby an individual can give 12k to a person as a gift but when you take the 12k out of your acct you have to pay the taxes...the bank told us all 9999.99 is not reported to the IRS nor State, but as soon as it is 10k or more it is.

We all got stung...Paid taxes out the wazzo to IRS and State too.

First we paid 10% to IRS then got taxed again 10%. I know from experience, it happened to us, but I am saying be leary and check it out. Call the banking institution...Better be safe and not have to pay more on what you saved.

This was not comp. money. But still too much cash out of bank puts up red flags when withdrawn.

If you are married you can each gift 12k to the one person and that is still a taxable gift to that person but then you need to file Form 709 as this is called gift splitting. You two pay the tax and the person it was given to does not. Our banks were trying to save us from paying tax with the withdrawl of 9999.99, and knowing over 10k is reported...so if you gift someone 12k as one person it will be reported to IRS and State by bank so you will pay taxes on that, but not the giftee.

Another interesting general rule is any gift is a taxable gift however, here are some exceptions:

Tuition or medical expenses you pay to a medical institution or an educational institution for someone;

Gifts to your spouse;

Gifts to political organizations for it's use;

Gifts to charities;

Gifts, excluding gifts of future interests, that are not more than the annual exclusion for the calendar year. No taxes paid by anyone on these gifts.

So gift up to the 12k individually to someone and they get it tax free but you pay taxes on it( but how my bank told us like 6k one week and 6k the next are not reported to the IRS so I guess 0 tax. As it looked like $ spent.

Are you trying to tell me that if you take money out of your account at your bank, then you have to pay taxes on it?

Like, if I go down to my bank and write a check for "Cash" in the amount of, say, $20K, then the IRS is gonna make me pay tax on this $20K?

Like, what if I went down to the Ford dealership and bought myself a new car and I just went by my bank and took out $20K to pay for my car, is the IRS gonna tax that $20K?

I know that if I give someone a check for $20K, then THEY will have to show that amount as "income" on THEIR taxes.

But, I already PAID my taxes on this $20K when I EARNED it and put it in the bank (at least what was left of it, after taxes).

I'm sorry, but I don't follow you about all this.

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We are talking oranges and apples. I was refering to deposits. By federal banking laws the back is supposed to report deposits of 10k or more or should you show a near 10k deposit on a regular basis, then it too can be subject to being reported. In the past terrorists would routinely transfer funds in excess of 10k and now with the new banking regulations they are trying to get away by depositing and transfering funds less than the 10k.

All I am saying is, don't trust what someone tells you, run it by your banker and the IRS to make sure you won't run into any problems. Its better to have a legal determination from the IRS than by a banker, accountant, even if they are a CPA.

Rockhound Rider B)

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I had deposits greater than 10k in a day but were checks, certified funds, money orders, bank drafts and never heard from IRS or my state, but when I took out 40k in one day the bank had to turn it in to State of MO and IRS...WE paid tax upon this and then when we filed we paid more...yes we use CPA's to do our taxes.

Do what you want I know we got taxed on it(the withdrawl, I know uncle got taxed and father-in-law got taxed because it was 10k or more too all was CASH). My banker was a V.Pres and had his masters and was a CPA.

Personally I do not want to pay any more taxes then I already do. I will NEVER take out more than 9999.99 CASH in one day.

I learned the expensive way. We have state tax in my state too, not like some that don't, like Tx.

Good luck to all. I don't work anymore and my funds have decreased by 80% so I need every penny, and I will keep all I can.

Check out IRS.gov and see you can give someone as a gift 12k, you pay tax on the gift but they don't...These are IRS govt laws.

Fool me once shame on you, fool me twice shame on me!

Better safe than sorry as the govt gets too much already from us poor folks.

Edited by halos2
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Here's a good quick overview of gift tax by Turbotax. In short, you can currently give up to $12,000 a year to a person without either the giver or receiver being taxed - so, transferring a big retro to a family member other than your spouse would create a gift tax burden on you and an income tax burden on the receipient:

http://turbotax.intuit.com/tax-tools/the_g...urbotax/article

The only reason anyone would be taxed on any withdrawals from a bank account is because that money had never been taxed before such as a 401K or SEP or other pre-tax retirement account. The extra 10% tax is a penalty for early withdrawal of retirment savings.

Hope this helps,

TS Snave

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