I really need to know about this one. If you get into a program online or win a large sum of money, and then donate 10% or more of it to a charity of some sort. Are you then exempt from paying taxes on that income? Please answer with details & a source.
2007-11-28 09:01:49 · 5 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
No way. You'll get a form 1099 in the mail, with that amount of money listed as winnings... and you MUST claim that amount as income on your tax return. The IRS receives a copy of that 1099, and I guarantee you they'll be looking for that money to show up on your return.
The donation will count as an itemized deduction if you itemize, using Schedule A, and the amount of your contributions is over the limitation amount.
I'm a professional tax preparer by trade.
2007-11-28 09:06:36 · answer #1 · answered by Anonymous · 3⤊ 0⤋
If you itemize, money donated to a recognized 501(c)3 charity makes that much of your income free from tax, since it's subtracted from your income before taxes are calculated.
But if you are asking if the ENTIRE prize is then exempt from tax, no, just the amount that you donated to charity. If you donated it all, then you wouldn 't pay tax on the prize.
2007-11-28 09:39:43 · answer #2 · answered by Judy 7 · 0⤊ 0⤋
If you accept a prize you have income.
A donation, at best, only reduces your income by the amount of the donation. Even if you later donated 100% of it to charity, you could still owe taxes. Since the IRS limits some charity donations to 50% of your AGI, you might not get to take all of the deduction.
Of course, lately, all of these questions are either hypothetical (wishful thinking) or the result of someone who has responded to a scam email promising them instant wealth but only if they use Western Union to forward money for out-of-country taxes, IRS taxes, customs, "anti-money laundering" certificates or "anti-terrorist" certificates....
2007-11-28 09:15:21 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Two separate issues.
The winnings are fully taxable. PERIOD. You cannot buy an exemption by making a donation. There's no such provision in the tax code so I can't link you to something that does not exist.
If you make a charitable donation it will be deductible IF you itemize deductions. Get the Schedule A&B instructions from the IRS website if you want to read up on that.
2007-11-28 09:10:22 · answer #4 · answered by Bostonian In MO 7 · 1⤊ 0⤋
No, you can't "buy" exemption from income with a charitable donation. The donation itself may be deductible from your income if you itemize deductions.
2007-11-28 10:32:19 · answer #5 · answered by Anonymous · 0⤊ 0⤋