Compensation hypothetical

quote:

---

give them periodic tax free "gifts" from my personal funds.. How likely would the IRS be to pick up on this if everybody kept their mouth shut

---

If you paid it As wages wouldn't you be able to write if off your own taxes?

Either it gets taxed on its way into your personal account or on its way into theirs.

My understanding is that you can give up to $14k in "tax free" gifts to an individual in a calendar year.

LINK

quote:

---

My understanding is that you can give up to $14k in "tax free" gifts to an individual in a calendar year.

---

It is not a gift though if they do work in return for the cash

quote:

---

Say I have family members working for me. Instead of taxable bonuses, I give them periodic tax free "gifts" from my personal funds.. How likely would the IRS be to pick up on this if everybody kept their mouth shut, and what would be the consequences if they found out?. Asking for a friend.

---

Wikipedia has the current court cases regarding this says determinations are made for on a case by case basis with these qualifications for "gifts"

Gifts = Gifts result from "detached and disinterested generosity."
Payments = contract payments "involved and intensely interested"


I imagine if you pay bonuses to other employees while relatives are paid under the table, you have a problem.

quote:

---

I would be paying FICA and they would pay FICA and income tax.. I think I could give them a smaller gift and we would both come out ahead.. i would have to figure out the breakeven point.

---

Not as far apart as you'd think

A) You don't pay FICA but have higher federal/state tax bracket than relatives offsetting some gains
B) You pay FICA for yourself anyways + likel higher tax bracket