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Accounting/Tax question

baganttbagantt
500 Comments
in North Carolina
My Dad has written me a check for his contribution to our wedding.  This check is greater than the yearly tax-free gift amount allowed by the IRS (which I think is $12k?).  By depositing this check into my bank account, could the IRS tax this as income?  I just don't want the IRS to tax it after my Dad already paid his income taxes on the $$.  It will all be used for our wedding, but a lot of it will not be used until next year.Your thoughts?  I appreciate your help/advice!
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Re: Accounting/Tax question

  • JemmessicaJemmessica member
    Fifth Anniversary 500 Comments
    edited December 2011
    I would go to your bank and ask. But my guess is that it will be taxed :-(
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  • grace_ugagrace_uga member
    500 Comments
    edited December 2011
    Can you have him write you separate checks so the money is under 12k?  I don't really know much about taxes....
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  • sjh456sjh456 member
    10 Comments
    edited December 2011
    I am by no means a tax expert, but is there a way you could split it up? Maybe deposit 6000 this year and 6000 next year...  or have him write YOU a check and your FI a check so that each check is under the amount.  Technically you guys aren't married YET, so it doesn't count as going to one person until you are married.   Just some thoughts...
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  • kgaligerkgaliger
    100 Comments
    edited December 2011
    Can't he write several checks directly to the vendors as they come up?
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  • andrea01012009andrea01012009 member
    100 Comments
    edited December 2011
    geez. never thought about this. i would do the separate checks. i know that the federal reserve tracks money passing through the banks in the amount of 10k and over.
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  • RedHead14RedHead14
    100 Comments
    edited December 2011
    i agree with what someone above said - have him write you a check for half the amount and FI a check for the other half.  That should cover it.
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  • RedHead14RedHead14
    100 Comments
    edited December 2011
    oh and i don't think it matters if you are married or not...I believe the 12k limit is per individual regardless of filing status.
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  • Mrs.LLGMrs.LLG
    10 Comments
    edited December 2011
    My parents wrote me one check for the wedding (they gave me a budget and wrote one check and I paid for things as I went) and I was never taxed nor were my parents and the check was well over that $12k number.
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  • baganttbagantt
    500 Comments
    edited December 2011
    Thank you for your responses everyone!  Mrs. LLG, I'm in the same boat as you - they gave me a number and now I'm taking over payment for everything.  I will probably just deposit the check and hope it goes unnoticed... I know that the interest/checking account amount will show up come tax season (ugh hate to think about it already) but I guess I just have to cross my fingers.
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  • kgaligerkgaliger
    100 Comments
    edited December 2011
    bagantt - Just something to keep in mind if you do deposit the check.  If you are audited and they go through your records and you don't claim the amount, they will tax it as income and you'll owe back taxes plus interest on the amount.  DH just got audited this year for his 2007 returns and had to submit records..they initally said he owed 50K in back taxes.  It only turned out to be a couple hundred, but they're definately looking at 'regular' everyday people these days.  GL w/whatever you decide.
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  • goheels05goheels05
    2500 Comments
    edited December 2011
    You have no tax liability for receiving the $12K gift, you don't need to have it broken up or paid directly to vendors or anything like that.  Here's why.You are right that the annual gift exclusion is $12K.  But all that means is that any gift over $12K is reportable by the donor (your father).  Here's how the gift tax works:  the donor (again, your dad) adds up all taxable gifts this year and in all prior years that he has given to any person.  There are some deductions and adjustments, but the bottom line is that pretty much the first $1 million in gifts that a donor gives are shielded from tax.  The bottom line is that your dad needs to file a form 709, but he will pay no tax and neither will you.  You're ok.  Just make sure that he files that form in case he gets audited.
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  • baganttbagantt
    500 Comments
    edited December 2011
    So goheels, what would I do with the amount in excess of $12k?  Thanks kgaliger, I heard about a friend of mine being audited for not claiming her unemployment income from 2005 so I know they are going after Average Joes now... I still have the check but haven't figured out what to do. Ugh :(
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  • goheels05goheels05
    2500 Comments
    edited December 2011
    Oh, sorry, I didn't make that too clear.  You deposit whatever he gives you.  $12,001, $30,000 doesn't matter.He reports the full amount that he gives you on form 709.  No one gets taxed, unless he gave you over $1million.  :)
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  • goheels05goheels05
    2500 Comments
    edited December 2011
    You're probably wondering, "well what the heck is up with the $12K limit if nothing gets taxed until it reaches $1M?"  The gift tax and the estate tax work hand-in-hand.  The purpose of the estate tax is to prevent families from accumulating wealth and passing it down for generations without it ever being taxed.  As you can imagine, people try to get around the estate tax by gifting their money in small increments in the years before they die.  The purpose of the gift tax form (Form 709) is to "catch" those payments that are effectively trying to avoid estate tax.Your dad is just paying for your wedding.  This is clearly not a case of your dad trying to avoid estate tax.  That's why this gift isn't being taxed.  Does that help any?
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  • baganttbagantt
    500 Comments
    edited December 2011
    Thanks goheels.  It does help explain the gift/estate tax thing but my main concern is that the IRS would claim that the check from my Dad is "income" and then tax me for it.  The creepy thing is that they can come back after how ever many years and do an audit and they could catch it after I thought I had slipped through the cracks...
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  • goheels05goheels05
    2500 Comments
    edited December 2011
    Right, and filing the Form 709 will ensure that he is covered if he is audited.Did you talk to your dad about it?  Does he have a CPA?  His CPA can take care of it and help ease any fears he may have. 
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