Tax/Withholding Liability

StuartT · #1 (**permalink**) 09-29-2015, 11:13 AM

My question is regarding any tax liability for three gifts we gave a friend who helped my wife on an educational website she has been developing. It is intended for colleges with medical programs as a teaching aid, but for now, it is simply hope-to-be business of the future with no current sales. Nor are we registered yet with the IRS or state.

This person wanted the educational benefit she would get by helping and we rewarded her for her assistance with the three $500 gifts, one in 2014 and two in 2015, without thinking there might be tax obligations.

Do we have a tax or withholding liability here?

Wnhough · #2 (**permalink**) 09-29-2015, 02:39 PM

My question is regarding any tax liability for three gifts we gave a friend who helped my wife on an educational website she has been developing. It is intended for colleges with medical programs as a teaching aid, but for now, it is simply hope-to-be business of the future with no current sales. Nor are we registered yet with the IRS or state.====> A recipient can’t avoid paying income tax by calling something a gift when it isn’t. as an illustration, a gift you give/ receive in exchange for SERVICES or some other consideration isn’t a gift; Only true gifts are nontaxable. In your case, the buddy receives the money for helping your wife on an educational website development, it DOES NOT seem to be true gifts but COMPENSATION , then you need to issue the friend a 1099MISC as the amt of $1.5K exceeds $600.

#1;This person wanted the educational benefit she would get by helping and we rewarded her for her assistance with the three $500 gifts, one in 2014 and two in 2015, without thinking there might be tax obligations. =======>As you paid him $1K in 2014 for his service, you had to issue hiom a 1099 as the amt of $1K exceeded $600, then he had to report the income on his return on Sch C aslongas the amount reported on Sch C of 1040 line 29 / 31 is $400 or exceeded $400. For 2015, as the amt is less than $600, you do not issue a 1099 to the friend.

#2;Do we have a tax or withholding liability here=>No UNLESS you give the friend a W2; the friend NEEDS to report the amt as a self employed income on his return on Sch C as said above. Plz contact the IRS enrolled agent or a CPA doing tax in your local area from more info.

Wnhough · #3 (**permalink**) 09-29-2015, 02:41 PM

Quote:

Originally Posted by Wnhough

My question is regarding any tax liability for three gifts we gave a friend who helped my wife on an educational website she has been developing. It is intended for colleges with medical programs as a teaching aid, but for now, it is simply hope-to-be business of the future with no current sales. Nor are we registered yet with the IRS or state.====> A recipient can’t avoid paying income tax by calling something a gift when it isn’t. as an illustration, a gift you give/ receive in exchange for SERVICES or some other consideration isn’t a gift; Only true gifts are nontaxable. In your case, the buddy receives the money for helping your wife on an educational website development, it DOES NOT seem to be true gifts but COMPENSATION , then you need to issue the friend a 1099MISC as the amt of $1.5K exceeds $600.

#1;This person wanted the educational benefit she would get by helping and we rewarded her for her assistance with the three $500 gifts, one in 2014 and two in 2015, without thinking there might be tax obligations. =======>As you paid him $1K in 2014 for his service, you had to issue hiom a 1099 as the amt of $1K exceeded $600, then he had to report the income on his return on Sch C aslongas the amount reported on Sch C of 1040 line 29 / 31 is $400 or exceeded $400. For 2015, as the amt is less than $600, you do not issue a 1099 to the friend.

#2;Do we have a tax or withholding liability here=>No UNLESS you give the friend a W2; the friend NEEDS to report the amt as a self employed income on his return on Sch C as said above. Plz contact the IRS enrolled agent or a CPA doing tax in your local area from more info.

NOTE; you did not give the firend the money UNLESS the friend helped yur spouse on the website, so they are NOT gifts.

StuartT · #4 (**permalink**) 09-29-2015, 03:18 PM

Quote:

Originally Posted by Wnhough

My question is regarding any tax liability for three gifts we gave a friend who helped my wife on an educational website she has been developing. It is intended for colleges with medical programs as a teaching aid, but for now, it is simply hope-to-be business of the future with no current sales. Nor are we registered yet with the IRS or state.====> A recipient can’t avoid paying income tax by calling something a gift when it isn’t. as an illustration, a gift you give/ receive in exchange for SERVICES or some other consideration isn’t a gift; Only true gifts are nontaxable. In your case, the buddy receives the money for helping your wife on an educational website development, it DOES NOT seem to be true gifts but COMPENSATION , then you need to issue the friend a 1099MISC as the amt of $1.5K exceeds $600.

#1;This person wanted the educational benefit she would get by helping and we rewarded her for her assistance with the three $500 gifts, one in 2014 and two in 2015, without thinking there might be tax obligations. =======>As you paid him $1K in 2014 for his service, you had to issue hiom a 1099 as the amt of $1K exceeded $600, then he had to report the income on his return on Sch C aslongas the amount reported on Sch C of 1040 line 29 / 31 is $400 or exceeded $400. For 2015, as the amt is less than $600, you do not issue a 1099 to the friend.

#2;Do we have a tax or withholding liability here=>No UNLESS you give the friend a W2; the friend NEEDS to report the amt as a self employed income on his return on Sch C as said above. Plz contact the IRS enrolled agent or a CPA doing tax in your local area from more info.

Thank you for your reply. So to clarify, we gave her $500 in 2014 and you are saying we do NOT need to give her a 1099MISC since it did not exceed $600. And because we gave her $1000 in 2015, we give her a 1099 MISC for $400 at the end of this year. Do I have this right?