This money came from an IRA and I gave the four of them 5k each. How do I prove I gave it away when my form shows the total amount is taxable?
2007-08-18 15:54:37 · 11 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
Sorry, but you taking $20,000 out of your IRA to give to your grandkids is a taxable event to you. Gifts are never taxable to the person receiving them no matter what the amount, and gifts, as long as they are $12,000 or under, are not taxable to the person giving them, but in your case you took money from your IRA which is a taxable distribution. Hopefully you aren't under 59 1/2, otherwise there will be an additional 10% penalty for an early withdrawal from your IRA.
2007-08-19 03:41:46 · answer #1 · answered by Anonymous · 1⤊ 0⤋
If the IRA you mention is a traditional IRA you will be taxed on any distribution regardless of what you did with the money. Giving $5K or $5 million has no effect on your individual income tax return. Any gift in excess of $12K to a single individual will have an effect on your estate tax which is not paid by you but rather your estate after you have passed away.
2007-08-18 23:36:35 · answer #2 · answered by ? 6 · 1⤊ 0⤋
1. Any money that came from IRA is taxable in the year it is received.
2. You may like to increase your third quarter estimated tax payment to account for tax on this amount.
3. You don't report gifts of less than 12k a year to any number of persons. Recipients does not pay any gift tax whatever is the amount of gift.
2007-08-19 00:15:47 · answer #3 · answered by MukatA 6 · 1⤊ 0⤋
There are two distributions of money in your case. The first distribution, from your IRA to you, is taxable to you. The second distribution, from you to your grandchildren is not taxable to you or your grandchildren.
You cannot escape taxes on an IRA distribution by giving the money away, sorry.
2007-08-19 07:24:39 · answer #4 · answered by ninasgramma 7 · 2⤊ 0⤋
I think you have misunderstood the law on taxes on gifts. The withdrawal from your IRA IS totally taxable. You don't get to deduct a gift you give from your taxable income. The "don't have to pay tax on gifts under $12,000 a year to any one person" refers to a different tax, the gift tax - if you give someone over the limit, you have to file a gift tax return and might have to pay an additional "gift tax" on the amount. It has nothing to do with income tax - you still have to pay that.
2007-08-18 23:27:38 · answer #5 · answered by Judy 7 · 3⤊ 0⤋
You had to pay taxes on the money as soon as you took it out of your IRA. The only way to avoid that is to donate the money to a non-profit organization. If you give it to anyone else, it's taxable.
The money is not taxable to your grandchildren (gift tax) because it was less than $12,000 each.
2007-08-22 15:24:22 · answer #6 · answered by Plea_of_insanity 5 · 0⤊ 1⤋
actually that is taxable income if you just gave it to them. its like buying them a car. you would have to of paid taxes on that money. just because it was cash and from an IRA does not exempt it from taxes. then what really sucks is they may have to report it as income and pay taxes too!
however, there are ways to get around the tax in a legal way.
you need to see a tax specialist.
2007-08-18 23:58:19 · answer #7 · answered by viajero_intergalactico 6 · 1⤊ 1⤋
You are incorrect.
All of this distribution is taxable to you. What you do with it afterward (give it away, spend it, etc.) is irrelevant.
2007-08-19 09:08:10 · answer #8 · answered by Wayne Z 7 · 1⤊ 1⤋
Use your cancel checks. Have proof of the funds given to them.
2007-08-21 21:58:00 · answer #9 · answered by Jovesash 4 · 0⤊ 2⤋
well your grand kid is going to have to pay taxes on that- and on top of that you will have to pay taxes on if its a IRA traditional unless its money from a roth ira which is money taxed already.
2007-08-19 01:29:50 · answer #10 · answered by bullet b 4 · 1⤊ 5⤋