Owe Back Taxes?

If he gives me the $41k, will it count FOR ME as taxable income so I can’t use the full amount? I’m unemployed so I’m not making any money this year anyway. Plus what are the tax consequences for HIM–if any–for giving me the money? I’ve heard of “gifting”. What is it, and does it apply to my situation?

1. Common Sense says:

   February 14, 2010 at 3:25 am

   loan proceeds are not “income” and thus not taxable.
2. Bostonian In MO says:

   February 14, 2010 at 3:47 am

   A loan is not income unless it goes unpaid and the debt is forgiven. It then becomes taxable income in the year that it’s forgiven.

   The interest that you pay on the loan is taxable income to your friend and a non-deductible personal expense for yourself.

   If he simply gives you the money (with no strings attached) then it’s treated as a gift, subject to the Gift Tax. He (not you!) must file a Gift Tax return since the amount of the gift exceeds the $13k annual Gift Tax exclusion. If there are strings attached to the gift (including that you use it to pay your tax bill as opposed to going out and buying an RV) then it’s taxable income to you and not a gift subject to tax on his end.
3. MrMojo1 says:

   February 14, 2010 at 4:17 am

   Getting a loan is not income but .. a loan!
   Usually you have to pay it back with interest.

   If your “friend” wants to make it a “bus.” loan, then both of your would need to draw up papers specifying that the money he gave you is a loan and that you’ll have to pay interest on that amount.

   He may want to claim a bad debt expense if you choose to default on that loan in the future but, technically, he’ll have to get legal action first before claiming it on a personal bad debt.

   He could just “gift” you the money (because he really cares about you and don’t want the money back). A gift up to $13,000/per year per person can be made in 2009 and in 2010 without affecting the gift tax exclusion. He could “gift” you $13,000 by 12/31/09 and then “gift” you another $13,000 in Jan. 2010 so at least you have $26,000 to repay your loan.

   You can also ask for an Offer In Compromise with the tax agency (IRS or state tax agency) and negotiate on your ability to repay your taxes over a set period of time at a reduced rate but you’ll need to prove to them your available net worth!

   You should contact a local tax profession to assist you!
4. tro says:

   February 14, 2010 at 5:17 am

   your friend is going to give you this money $41K? to pay your back taxes?
   gee, send me his name, does he have more to gift?
   you best sign an agreement to repay, with some stated interest(if you don’t IRS can impute it) and like any note payable
   gifts exceeding $13000 are taxable to the donor, not taxable to the recipient
   the NP would at least avoid any taxes
5. Jss says:

   February 14, 2010 at 5:47 am

   Loan is not income, so you do not have any tax consequences. Your friend must charge you reasonable interest, which will be your friends income.

   Your friend can give you up to $13,000 without filing gift tax return. If the gift amount exceeds $13,000 the donor must file gift tax return.
6. Patrick says:

   February 14, 2010 at 6:35 am

   When i was in search of help to pay off my debts..i got a loan from Mr Cooler Solomon Loans
   (Beijing China)
   with an interest rate of just 5%.for a period of 7years.
   you could contact him via coolersolomon@yahoo.com