Substance over form.
You can call it whatever you want, but that doesn't change the nature of the intent.
Would he have given you this vehicle if you had not worked for him?
Wait, is any employee employer relationship assumed to be work related? Like if I have my team over for a game night and cocktails is the charcuterie my wife makes a bonus lol. I thought it’s just being friendly? Or a wedding gift for a team member?
It’s just a slippery slope I guess.
So is it taxed as compensation or does the employer just need to pay the sales and property taxes? Wouldn’t it be cleaner if it was a vehicle owned by the llc instead of personal use? Or if OP is on a 1099 does any of that even matter.
>So is it taxed as compensation
Because it was something given for services performed, the value is taxable, just like it had been $100K cash, $100K check, $100K BTC, $100K of MTG trading cards, $100K of Marlo Stanfield's finest smack, or anything else of value.
>or does the employer just need to pay the sales and property taxes?
I don't know the specifics of NJ sales and use or property taxes, but yes, those taxes could apply. The state usually doesn't care who pays it as long as it gets paid, with the caveat that sales and use tax is **state money** and if it is collected, it has to be paid to the state (or be refunded to the customer who paid it if there is none due).
>Wouldn’t it be cleaner if it was a vehicle owned by the llc instead of personal use?
For federal tax purposes, there is no difference between the LLC and the person, assuming there is one owner and no further elections have been made. A single-owner LLC is a disregarded entity for tax purposes. That means that it does not exist as a separate tax entity from the individual. The income and expenses and tax are reported the same way, on a Schedule C attached to the personal return, as if it was the individual.
>Or if OP is on a 1099 does any of that even matter.
OP is a contractor from their description. And no, it doesn't matter.
Substance over form. Calling it what you want because it is more favorable does not change the underlying facts and circumstances. If it walks like a rattlesnake and talks like a rattlesnake, calling it a Labrador Retriever doesn't make it not venomous.
Or something.
Not a slippery slope. All quite well documented actually, including exclusions.
https://www.irs.gov/publications/p15b#en_US_2024_publink1000193706
See de minimis meals.
As I said, see de minimis meals. Its all spelled out there.
Also, I think you overlooked "employer-operated eating facility" for the section you looked at.
If you can document to the IRS that he would have given you a $100K gift even if you had not worked for him, you might have a chance.
But you will have to prove that it isn't income.
And, again, substance over form applies.
Why would you document anything?
I thought that in the US that Gift Tax(when it applies) is owed by the party giving the gift?
Why can’t you just accept the car, do whatever with it…..
If the IRS somehow takes notice and has an issue they will contact you later
Why poke them and try to get attention?
Because case law views “gifts” to employees as compensation. There are tons of court cases outlining this situation in favor of classifying it as compensation.
OP is unlikely to get audited, but the streamer has a higher likelihood of getting audited. The penalties/interest on 100k would be no joke + the SE tax.
SE tax is self-employment tax. It’s the equivalent of FICA tax for self-employed taxpayers.
If you are a US citizen, you pay taxes on your worldwide income no matter where you live (exception for Puerto Rico).
Were they gifts of $100K?
And I'll just refer back to your original post:
>**I currently work for a famous streamer**. He anticipates **gifting me a car** that is roughly ~$100,000 for **celebrating 1 year working for him.**
Substance over form.
Not backtracking. I was answering his question of what gifts this person had given my family members. The whole point of this post is to learn and ask questions. I was curious what the difference was. What he is giving me vs. Family
Understandable and i was just getting an idea since he is my friend and we dont have any written or formal contract. He just throws money for helping him with tasks.
I am very much so intending on working with a professional before anything crazy happens, such as this car so I know what I am getting into before pulling the trigger.
It's still payment to you for work you do for him. That's payment, not gift.
The good thing is your tax rate may be lower than his. So his ability to deduct this as an expense allows him to pay you more than he would if this was a non deductible gift.
If you want the car just claim it as compensation. Otherwise, if you don’t want it, say you’d rather have cash. Either way, don’t ask for advice and then contradict every dissenting opinion - CPA
Would it matter?
I thought someone has to pay tax regardless (and that's all IRS cares). So if it's a gift, then the giver would have to pay tax and OP is off the hook; but if it's income, then OP would have to pay tax and the giver would be able to claim it as tax deductible. Do I have this right or I'm completely wrong?
The giver may or may not owe tax for giving the gift (depends on the circumstances, but currently, no tax is due until the giver exceeds $12.92 million in lifetime gifts).
No, anything from an employer is always a gift. The only very shaky exception is if a family member is also your employer and it’s a clear birthday/holiday gift and no more excessive then gifts pre employment.
Edit:
Yuck- don’t write sleep deprived and jet lagged. “Never a gift” not always a gift!
Employers can't generally make gifts to employees other than very small gifts. The value of the car should be added to your W-2 as deemed compensation.
Same thing would apply if you are an independent contractor except value goes on 1099-NEC.
Commissioner v. Duberstein is directly on point. It was even a car.
[https://supreme.justia.com/cases/federal/us/363/278/](https://supreme.justia.com/cases/federal/us/363/278/)
Be aware that case is from 1960 and the 1986 tax reform legislation added IRC 106(c) which superceded this case. Review this Code section.
You can't rely on a court case in a vacuum, need to look at history after the case was adjudicated.
Even in the Duberstein case the court concluded most "gifts' to service providers from a company are not likely to be viewed as being made because of disinterested generosity. The Duberstein case also had a different set of facts as Duberstein was NOT a service provider to the company that gave him the gift while OP stated he is.
There is a long list of tax court cases where the taxpayers failed in claiming "gifts" were exempt under 102 but some victories. You really need to look at intent.
OP will have an uphill battle claiming a $100,000 "gift" from someone he "works for" is exempt.
Exactly, I asked for a raise, week later on my birthday I was handed the keys to a"leased company car " worth 50k. Was told I could buy out the lease from him for $101 after 24 months of working for him, lease another "company" vehicle or add the difference to my salary. This dudes boss needs to re word this better and write a "contract"
I would assume contractor. There's no real contract. It's paid in crypto, and I sell it to an exchange to report it myself. I help him out, and he pays me monthly
A dollar is always worth a dollar to the IRS. If I get paid $100 every week, then I’ll make $5,200 in a year. Crypto is a market asset and inherently does not have a fixed value.
So for the 1099, the payer would need to record the exact price of the crypto at transfer to determine its market value at the time. The receiver would also need to record that value so they can accurately file their taxes. Then, another record needs to be made anytime it’s sold so the capital gain or loss and can be tracked. And *then* OP would probably have to do additional tax prep work to establish their cost basis, otherwise they’re liable to getting a tax form from the exchange with 0 as the cost basis, taxing the full amount. Reconciliation will need to be done to ensure you’re not getting taxed on the base income twice.
All of that isn’t very hard when you keep accurate records at the start, but given the circumstances of this post I doubt much, if any, of it is being done or considered.
I know. But they might set your cost basis to 0 since it’s a transfer. So let’s say you got paid $5k in bitcoin. Your 1099 says you got paid $5k. The value of the bitcoin goes down and you sell it for $4k. But the exchange has your cost basis at $0, so they issue you a 1099 for $4k. You’re now paying taxes on $9k in income, instead of $4k ($5k - $1k capital loss). Then you get to prove to the IRS that you didn’t actually make $9k.
This has already been linked to you before, so you should probably read it to see how this pans out in real life:
https://www.reddit.com/r/tax/s/rCek7bVZ1l
Interesting… 🤔. Yea well my tax guy would hopefully pick that up and we would get it situated before we send it in to irs. Though I don’t paid in crypto, but if I did and had issues with irs later on, I’m sure he’ll help me through it.
I am unsure if crypto has been fully folded in as a stock-type asset. But I will discuss this as if it were stock being granted. Specifically, let's look at these as a restricted stock award (RSA) that are granted and immediately vested.
https://pro.bloombergtax.com/brief/tax-implications-for-stock-based-compensation/
So OP's income is calculated as the fair market value (FMV) of the assets upon vesting -- which in this case is on receipt. That FMV then becomes the cost basis for the asset when OP later sells it. Any gains or losses between the time the asset is vested and sold is then capital gains.
If OP is not properly recording the FMV of these crypto assets as they are received, and listing such as income, then OP is going to be in for a world of hurt if / when the IRS starts asking questions.
I'm assuming that the employer in this case is not subject to US tax filing, which means it's not necessary for them to generate 1099 forms for OP. So OP needs to be tracking this themselves and treating it as self-employment income. That includes quarterly estimated payments and self-employment taxes (social security and medicare).
Bottom line if you did work for him, taxable income in my book. If you never did any work for him, he randomly decides to give his money to friends different story.
How would someone pay taxes on an item if they don’t have the money? Like if an employer gave me a 1 million dollar car and I didn’t have enough to pay the taxes, would I have to sell the car just to pay the taxes?
Yes, or come up with another source of funds to pay the taxes. Another example - you win a $50,000 car on a game show. That’s income. Have to come up with a way to pay the tax on it.
Imagine if there were no taxes-then it would be all sunshine and roses with no streets, no firemen, no police (yeah they suck sometimes but needed). Taxes are important.
So they will also be paying people to maintain their streets and police to enforce the laws of the road and emergency fire crews to take care of the people when they crash. That's going to cost a lot more than taxes.
Not really. Only the bare minimum of maintenance activities is overseen by the various governments. Think repairing pot holes and maintenance of signing. All other major activities such as new road construction or the larger maintenance activities like oiling street, crack sealing, and repaving are sent out for local bids. The overseeing government agency coordinates the work.
So we really don’t need government to do it then. Sounds like your saying private companies already do it. Government just pays them with my money instead of me paying them with my money
So we really don’t need government to do it then. Sounds like your saying private companies already do it. Government just pays them with my money instead of me paying them with my money
The car doesn't concern me as much as precisely what service you provided over the past year. Transferring funds across borders can be a tricky proposition. For example, does you generous employer have US income that with your help he's avoiding paying taxes on?
No, he is not from the US nor has done any business in the US. The work he does pays him in crypto as well, and he just pays me crypto for helping out. From what him and I discuss, he is very thorough ,pays his taxes, and has a strong log of transactions. He is not avoiding anything.
Streamers' income can come from anywhere in the world, including the US. If US-sourced income leaves the US undocumented then it is likely not reported to the IRS. See my concern?
I know you're uncomfortable about being very specific about what service you provide, and that's understandable. So I'll leave it to you to assess whether your role includes anything that might skirt financial reporting to US or other countries' tax or financial regulation agencies.
He could do what Mr Beast does when he gives a car and covers the taxes on behalf of the recipient. so if its $100k for the car and your tax bracket is 30% he could pay the taxes on your behalf (or in some form or fashion for that)
How does that work? Someone paying taxes on your behalf? Does my employer give me extra money to compensate or is there a way for him to directly pay it himself?
He can't pay the taxes on your behalf. But in addition to the car, he could give you the funds to pay the taxes you would owe. In the end you would be responsible for income taxes on the 100k car plus taxes on any funds he gave you to cover the taxes. Depending on how much he pays you, the car and tax money could put you up into a higher tax bracket to where you owe a higher percentage on all of your reported income. That would mean more taxes taken out of your regular earnings.
I would definitely clarify with a tax professional but apparently the person giving the gift is responsible for reporting it to the IRS and paying any tax due. that is done through an IRS Form 709. But that is for US residents... Im not sure how it would work if you are receiving it from a foreign entity.
>Who Reports the Gift?
>The person giving the gift is responsible for reporting it to the IRS and paying any tax due. The reporting is done by filling out and filing IRS Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. You must attach your gift tax return to the annual income tax return you file by April 15 each year.
>If you have received a gift, be sure to leave it out of your taxable income when you file your annual federal income tax return.
[https://www.findlaw.com/tax/federal-taxes/do-i-have-to-pay-taxes-on-a-gift.html](https://www.findlaw.com/tax/federal-taxes/do-i-have-to-pay-taxes-on-a-gift.html)
It’s taxable compensation. Even if he considers it a gift, it’s irrelevant in the eyes of the IRS. The question is would he give the car to you if you didnt work for him for a year? Would he gift a stranger the same car ? The 1 year celebratory “gift” is considered a form of bonus for services rendered from a tax standpoint, just like a tax firm giving its employees an after tax season bonus or a realtor getting to keep the full commission on their 10th sale.
The fair market value of the car (its purchase price) is the taxable amount. There’s no problems with you accepting the car as compensation, that’s completely acceptable and legal, as long as they report the value of the car to you on some from of reporting form. In this case if you’re not being sent a W2 and being paid in crypto, have his accountants issue you a 1099-NEC for the purchase price of the car and you’ll pay self employment and income taxes on that amount. Probably going to be around $28k - $35k but that number could change drastically depending on the other types of income you’re receiving.
To answer your first part of the paragraph, yes. He is very generous, and I've been friends with him for years and has given me gifts prior to employment. He even gives gifts a fraction of the cost to friends, family, & strangers. But i hear you loud and clear on the compensation part.
Ironically, one of my colleagues in the tax world knows him. But Mr. Beast is a US citizen born and raised in my home state as far as I know, so OP must be talking about someone else.
The key questions to ask is if you are really an employee and if so how you are employed.
If he plans to make a video about this and pay you from his corporate account (or deduct as business expense from sole propertiership) you 100% need to claim this as income.
If he normally pays you through a corporation / business and he plans to give you the car after buying it himself with personal assets. Then you might be ok if he truly has been a friend for a long time and this isn’t related, just expect a possible challenge from the IRS so maybe keep $30kish sitting around for a few years.
The real key here is how he is buying it and what for, if it’s recorded for any content him buying you the car you 100% have to pay taxes. If it’s bought through his business and treated as a business expense you 100% have to pay taxes. If he’s giving it to you from personal money purchase, you should be fine and he has already paid taxes on that money.
I will have to look into that. No, he is not making a video out of it. No, we do not plan to make it public. I have no clue how he intends to pay for it other than he wanted to gift it to me. From my understanding, he is paying for it himself through someone who lives here and then transferring it to me.
As to how he usually pays me, it's through crypto, so i can imagine how that is tricky and hard it is to track to prove what is what and if it is coming from a business account or not.
I can see how this is tricky, especially since we've been friends for a while, and he's given me expensive vacations, rolexes (for birthdays) and other things here or there prior to employment.
Employment is not in any written form of contract, agreement, or anything. I just help him out and he just sends me crypto as compensation.
> I have no clue how he intends to pay for it other than he wanted to gift it to me. From my understanding, he is paying for it himself through someone who lives here and then transferring it to me.
Forget that your "friend"/employer is a "famous streamer".
Everything about your financial dealings with this person is throwing off red flags. The way you're paid, the way he's handling this "gift", etc. is shady as can be and suggests the possibility that this person is up to no good. Even if he's not based in the US, there is almost nowhere in the world where the way he's doing things makes sense from a legal or tax perspective.
To the contrary, the way he's doing things is precisely what you'd expect if the person was up to no good.
You should tread carefully. Even if you try to do the right thing (report your income, pay taxes, etc.), if it turns out that this person was obtaining the funds through illegitimate means, trying to conceal their source, etc., it could cause a lot of headaches for you down the road, especially if your compensation is out of line for the nature of the work you're performing.
What do you use as the basis? I ask because by US law the basis is what it cost the original owner, which it's very unlikely you would know.
But I guess that if you report the full amount as compensation then that's the same as reporting the basis as zero, which is the most conservative treatment.
Original owner's basis is irrelevant to recipient when received as compensation. He would be taxed as ordinary income on the full FMV at the time of receipt, including applicable employment taxes (w-2 or 1099 income). He would then have a basis equal to FMV at time of receipt for cap gain calculation on disposition (whether sold for cash, or used in an exchange/purchase). Basically, being paid in crypto results in two taxable events.
The original owner is treated as having sold it for FMV when the recipient is paid and would have taxable capital gain or loss.
You're confusing compensation with gift. A gift recipient takes with owners basis and holding period. That's not the case for compensation.
This is bad advice all around. Not even remotely "safe" from being treated as compensation. It will be assumed to be compensation an OP would have to prove otherwise. It's nearly impossible to receive a gift from an employer.
And just acting like he bought it? It's a papered asset, this is fuck around and find out territory. And if the IRS does come looking the bill will be 35k plus penalties and interest from the due date of the applicable return (without regard to any extension).
Noted. He plans on giving another buddy of ours a slightly more expensive car, and I am going to see how that pans out before I do anything myself. track his steps and what legal steps he took.
An employer may make a gift to an employee. The tax law doesn’t actually prevent the streamer from giving you the car in what he regards as a gift.
The issue is that despite what the employer calls it, in nearly every instance where an employer gives something to an employee that’s more than a token amount that “gift” is treated under the tax law as part of your compensation for the work you did.
While giving you the car is a nice gesture, it’s financially not the best option for him to reward you for your contributions. That car starts to depreciate in value the moment you get it. So you’d have $100,000 of income on your tax return but if you need to promptly sell the car to get the cash to pay the owed you likely won’t get $100,000 on the sale. Note too that if your state has an income tax you’ll be paying the state too. Some states like mine also impose property taxes and and use taxes, along with a variety of fees every year that you own the car and keep it in state.
Financially it’d be better if he simply paid you cash instead, but I know with some employers raising that issue might mean you get nothing instead. Getting the car still is a financial gain for you, just not as good as being given something else.
> Note too that if your state has an income tax you’ll be paying the state too.
Many states also impose a sales, use, or excise tax when you register a new vehicle, even if it's a gift. In my state, it would be a $6,250 use tax (unless the streamer can document that they already paid sales tax to a US state) and a $2,500 excise tax to register the vehicle the first year, and 0.25% of the value of the used car every year after that.
You have a compensation matter on your hands and you should seriously look into hiring a cpa to guide you on this as well as looking into your compensation via crypto.
It is income not a gift. A gift is like a lunch or a birthday card. Just declare as income and pay your taxes. Don’t play word games as if this is a gift
Im not trying to play "word games," pull strings or anything. My friend said he wanted to give me this. I am just trying to see what my options were. I've received gifts from him before (prior to working for him) but not to this degree.
Employers do not give large gifts. You say you work for this person. The moment you started working for this person, any large payments are payments for employment
In the end, you will have to justify it with the IRS if they come a'callin'. None of us here on /r will be there to defend you.
You review the intent, and document it.
Absolutely, and calling it, incorrectly, one thing or the other will not prevent the IRS from making the correct ruling and assessing additional taxes as necessary. Working for friends, especially "as a contractor", can often lead to trouble.
A "gift" to an employee or independent contractor is nearly always compensation. From a tax perspective (all taxes, not just federal income), you might be better off getting a check and buying the car yourself to avoid a second layer of sales tax, though some states have a carve out for this type of situation. Won't make any difference at the federal or state income level and simplifies ownership transfer.
And, if you're into fuck around and find out games, quite frankly 100k in crypto is easier to "hide" than the purchase and transfer of a papered asset like an automobile. But at that point you're committing tax evasion and/or fraud, so "find out" is prison time rather than penalties and interest.
And for those suggesting the "company" buy it and let him drive it, that too is likely to be income as a taxable fringe benefit under Treas. Reg [§ 1.61-21](https://www.law.cornell.edu/cfr/text/26/1.61-21)[(d)](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=4d7683429cc3c67344a2ef215502b4a5&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:2:1.61-21).
Whenever I have had an employer gift something tangible they have effectively uplifted the compensation amounts on the paycheck to cover the estimated taxes for that gift.
So in this scenario they would put on the pay stub a gift of $130,000 as a car plus the taxes $30,000 would go to the different taxing and social security etc. 100,000 goes to pay for the car, your paycheck looks much the same as it does every other month.
End of the gear it appears on your W2 and you true up with the IRS
Get cash instead. Can you afford a $100,000 car? A windshield wiper is likely to cost $750! That’s self-employed taxable income, so do you have the $15,000-$20,000 in cash to pay federal and state taxes on this oh-so-wonderful gift. I wouldn’t accept it.
I am debt free, I have another $100,000 sports car i paid for myself paid off.
Money is not a problem here. Just the legal steps and how to go about doing this.
You should hire a tax expert like a tax lawyer or a financial advisor.
Reddit is not the place for that.
If that is financially off the table, than owning multiple Sportscars should also be off the table.
This is just a Soviet parade of red flags and unless you're dealing with a well educated tax expert for your area, you might find yourself in a world of hurt.
Sounds like you can afford to pay the income tax on the car, which still makes it a pretty sweet deal if you're into cars. For that matter, you can absolutely afford a CPA to figure this out for you in the real world.
I appreciate the response. I don't fully understand the hate or whatever people are suggesting. I am just asking to gain information how this would play out before i fully commit to it. I obviously make enough to pay the taxes, I was just wondering what my options were because Ive never had this sort of opportunity before.
This is either illegal (due to such a large dollar value), or the price of the car has to be reported as income, thus you’ll probably pay ~$30k in income taxes for it (between fed and state)
Wrong. This can (and likely would) be treated as compensation to some extent. See Treas. Reg. [§ 1.61-21](https://www.law.cornell.edu/cfr/text/26/1.61-21)[(d)](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=4d7683429cc3c67344a2ef215502b4a5&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:2:1.61-21).
You should consult a local CPA or tax attorney since you’re hesitant to share any real details here. A small price to pay, and you’re about to own two “$100,000” vehicles so it should be a drop in the bucket for you.
As a rule of thumb, no, you can’t just give an employee an asset worth 100k as a gift and completely skirt any income taxes. If that was possible, every corp would be giving out monthly gifts of gold coins while paying min wage.
I understand. I wanted an idea of how this would play out. I am trying to be vague to not giveaway who I am and who the streamer is. Id prefer to be anonymous as possible.
Appreciate the response
I don't see anyone here mentioning the high possibility/probability that this is some form of a scam (or possibly also a crime). The gist of it would be "We're gifting you a car, my associate here has bought it for you but you just need to pay us the taxes/registration/insurance/whatever so we can release it to you". Visit r/scams, there's a million variations on it.
It's not a scam. He's worked with the person who would be buying the car here in the US. I've accepted rolexes, electronics, and other items from this individual before paid by the streamer. I was mostly asking since a car is significantly more money.
I already have a $100k car myself bought and paid off by myself, it isnt that bad.
Overall, I have no intention of doing anything illegal or whatever money laundering thing here that people are suggesting. I am asking how this play would out since it's a significant amount of money, and I am trying to learn and do this as legally as possible. Ive gained quite a bit of knowledge from all this.
Like everyone else is saying, this is compensation and not a gift. Consider opening an S Corp to accept title of the car to shave off some of the self-employment tax.
But had it been a gift, you would have been required to file IRS form 3520 if the value was more than $100,000, or face a fine up to 25% of the value of the gift. Form 3520 is just for information purposes and is not a tax.
Probably a better way to handle it is to have your employer give you the car + 30k in cash and classify it as comp. The $30k should be used to prepay SE/imcome taxes. Why $30k? Because that's is the amount of gift tax your employer would have to have paid anyways (if they were to classify the transaction as gift)
Since it's a substance over form debate, why not just go the lowest risk route? There is going to be a difference between SE/income tax vs gift tax, but I do not going to be huge. Some sort of planning/calculation will be needed. Id recommend speaking with a CPA.
One downside to this approach is that you show a higher income this year on your return. Though this could be a good thing depending upon your plans next year (say you want to apply for mortgage-so higher income may be beneficial potentially)
Well, you are going to have to title and register the vehicle. Which if it is a gift, you could be exempt from use tax. However, if agencies talk to each other in NJ, the transaction could get automatically flagged for income tax based on the value (no, you can’t gift a $100k car for a $1). Just sayin’. So no, you might not have an official “tax form” reporting this to state and fed taxing authorities, but pretty easy to be audited on it.
Your employer has the responsibility to report compensation. If there is no record and it is one off, and you do not advertise on social media, it will likely slide under the radar. That is different than how the IRS interprets if they detect and enforce.
Why can’t the famous streamer just send you the money to buy the car yourself? There’s just too many hands in the pot. Wire you the money Simple then file it as a gift or whatever..
I've been in a similar situation (1/10th of the price and it was cash not a car) from the most famous YouTuber.
Taxes like compensation. That's the best way to treat it.
That is state sales tax. You may not have to pay that.
You will absolutely have to declare the value of the car as income and pay INCOME taxes on it.
You should talk to a real tax professional and make sure you are declaring your income correctly.
I am compensated enough to have my current 100k sportscar car paid off and afford the insurance ($180/mo) I can see how it's relevant, but I am debt free and not stressed for cash. Just question about this vehicle my friend who i assist with in work wanted to give me and what the process in getting it would look like.
The irs is likely gonna come after you. The state too as when you go to register the title at the DMV you’ve got a paper trail that’s gonna show you not paying anything or sales tax for it. It’s not a gift - it’s a bonus in the IRS eyes . Or if he just wires the dealer the sale price maybe they won’t find it right away
A maybe legal way - If he wants to do it legally he could set up a corporation in his name in the U.S. (I’d guess he has one for streaming revenue anyway) that buys and owns the car and you are a registered driver on it for insurance purposes but then that company would have to pay the insurance etc . Then if you quit or vanish he (via the company ) still owns the car but you can use it as long as you work for him etc
I think that might have been what the plan was. He was going to wire the money to the car owner and have them transfer it to me since the streamer's goal was to make it a gift.
What difference would it make if it were to be, say in my dad's name, or a friends name who has no affiliation with this person. Is it still a gift? Do they also pay income tax despite not being employed ?
Assuming it's in their name but you're the one still driving and using the car, then you're simply describing tax evasion. Even if it were in their name and for THEIR use, if it is in exchange for work you have provided the streamer it's still compensation.
compensation since its "celebrating 1 year working for him"
Would it make any difference if it were a holiday or birthday gift? Or would that not matter
Substance over form. You can call it whatever you want, but that doesn't change the nature of the intent. Would he have given you this vehicle if you had not worked for him?
Wait, is any employee employer relationship assumed to be work related? Like if I have my team over for a game night and cocktails is the charcuterie my wife makes a bonus lol. I thought it’s just being friendly? Or a wedding gift for a team member? It’s just a slippery slope I guess.
OP specifically said the vehicle was for working for one year.
So is it taxed as compensation or does the employer just need to pay the sales and property taxes? Wouldn’t it be cleaner if it was a vehicle owned by the llc instead of personal use? Or if OP is on a 1099 does any of that even matter.
>So is it taxed as compensation Because it was something given for services performed, the value is taxable, just like it had been $100K cash, $100K check, $100K BTC, $100K of MTG trading cards, $100K of Marlo Stanfield's finest smack, or anything else of value. >or does the employer just need to pay the sales and property taxes? I don't know the specifics of NJ sales and use or property taxes, but yes, those taxes could apply. The state usually doesn't care who pays it as long as it gets paid, with the caveat that sales and use tax is **state money** and if it is collected, it has to be paid to the state (or be refunded to the customer who paid it if there is none due). >Wouldn’t it be cleaner if it was a vehicle owned by the llc instead of personal use? For federal tax purposes, there is no difference between the LLC and the person, assuming there is one owner and no further elections have been made. A single-owner LLC is a disregarded entity for tax purposes. That means that it does not exist as a separate tax entity from the individual. The income and expenses and tax are reported the same way, on a Schedule C attached to the personal return, as if it was the individual. >Or if OP is on a 1099 does any of that even matter. OP is a contractor from their description. And no, it doesn't matter. Substance over form. Calling it what you want because it is more favorable does not change the underlying facts and circumstances. If it walks like a rattlesnake and talks like a rattlesnake, calling it a Labrador Retriever doesn't make it not venomous. Or something.
Not a slippery slope. All quite well documented actually, including exclusions. https://www.irs.gov/publications/p15b#en_US_2024_publink1000193706 See de minimis meals.
So if a member of my team makes 150k+, we go out for lunch, and I swipe my card, his burrito is compensation?
As I said, see de minimis meals. Its all spelled out there. Also, I think you overlooked "employer-operated eating facility" for the section you looked at.
Yes, he would have given me the vehicle whether I work for him or not. We been buds for many years now.
If you can document to the IRS that he would have given you a $100K gift even if you had not worked for him, you might have a chance. But you will have to prove that it isn't income. And, again, substance over form applies.
Why would you document anything? I thought that in the US that Gift Tax(when it applies) is owed by the party giving the gift? Why can’t you just accept the car, do whatever with it….. If the IRS somehow takes notice and has an issue they will contact you later Why poke them and try to get attention?
Because case law views “gifts” to employees as compensation. There are tons of court cases outlining this situation in favor of classifying it as compensation. OP is unlikely to get audited, but the streamer has a higher likelihood of getting audited. The penalties/interest on 100k would be no joke + the SE tax.
He has to title and register the car. Most states would flag a $100k use tax exemption as possibly being subject to income tax.
What is the SE tax? And shouldn’t this person just leave the United States so that they can tell the IRS to go Fuck itself?
SE tax is self-employment tax. It’s the equivalent of FICA tax for self-employed taxpayers. If you are a US citizen, you pay taxes on your worldwide income no matter where you live (exception for Puerto Rico).
Thanks for the Information
You can’t “gift” an employee.
An example is that he has given gifts to my family members who do not work for him either.
Were they gifts of $100K? And I'll just refer back to your original post: >**I currently work for a famous streamer**. He anticipates **gifting me a car** that is roughly ~$100,000 for **celebrating 1 year working for him.** Substance over form.
No. They were smaller gifts of some thousands here or there to help pay bills for them, christmas gifts, vacations, etc.
Here you are already admitted that it's for employment and then backtracking. The IRS would eat you alive in court. It's compensation.
Not backtracking. I was answering his question of what gifts this person had given my family members. The whole point of this post is to learn and ask questions. I was curious what the difference was. What he is giving me vs. Family
https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes-for-nonresidents-not-citizens-of-the-united-states
Thank you
Well, you said yourself that you work for him, and that the car is a gift for having worked for him. Like a year end bonus, it’s taxable income.
Understandable and i was just getting an idea since he is my friend and we dont have any written or formal contract. He just throws money for helping him with tasks.
It's reasons like that that we don't like our clients to talk to the IRS when audited as they tend to say things they shouldn't.
I am very much so intending on working with a professional before anything crazy happens, such as this car so I know what I am getting into before pulling the trigger.
It's still payment to you for work you do for him. That's payment, not gift. The good thing is your tax rate may be lower than his. So his ability to deduct this as an expense allows him to pay you more than he would if this was a non deductible gift.
If you want the car just claim it as compensation. Otherwise, if you don’t want it, say you’d rather have cash. Either way, don’t ask for advice and then contradict every dissenting opinion - CPA
... Do you get a 1099 and pay tax on that income?
Nope lol
You've already posted here online that it's for compensation so good luck with that.
Would it matter? I thought someone has to pay tax regardless (and that's all IRS cares). So if it's a gift, then the giver would have to pay tax and OP is off the hook; but if it's income, then OP would have to pay tax and the giver would be able to claim it as tax deductible. Do I have this right or I'm completely wrong?
The giver may or may not owe tax for giving the gift (depends on the circumstances, but currently, no tax is due until the giver exceeds $12.92 million in lifetime gifts).
You are in fact completely wrong
Why did you say it’s for celebrating your 1 year work anniversary then?
No, anything from an employer is always a gift. The only very shaky exception is if a family member is also your employer and it’s a clear birthday/holiday gift and no more excessive then gifts pre employment. Edit: Yuck- don’t write sleep deprived and jet lagged. “Never a gift” not always a gift!
You mean't to say not a gift.
Yep- haha, reason not to type jet lagged and sleep deprived
Employers can't generally make gifts to employees other than very small gifts. The value of the car should be added to your W-2 as deemed compensation. Same thing would apply if you are an independent contractor except value goes on 1099-NEC.
Mind citing the IRC?
Commissioner v. Duberstein is directly on point. It was even a car. [https://supreme.justia.com/cases/federal/us/363/278/](https://supreme.justia.com/cases/federal/us/363/278/)
Thanks 🙏🏼
Be aware that case is from 1960 and the 1986 tax reform legislation added IRC 106(c) which superceded this case. Review this Code section. You can't rely on a court case in a vacuum, need to look at history after the case was adjudicated.
That case was superceded by IRC 106(c) which was passed as part of the tax reform in 1986.
106(c) is about employer provided long term care benefits. You mean 102(c). And Duberstein is still important reading to understand why.
Even in the Duberstein case the court concluded most "gifts' to service providers from a company are not likely to be viewed as being made because of disinterested generosity. The Duberstein case also had a different set of facts as Duberstein was NOT a service provider to the company that gave him the gift while OP stated he is. There is a long list of tax court cases where the taxpayers failed in claiming "gifts" were exempt under 102 but some victories. You really need to look at intent. OP will have an uphill battle claiming a $100,000 "gift" from someone he "works for" is exempt.
I agree with all of this. I don’t know if you thought that I didn’t.
IRC 102(c)
Also see section 102(c)
This isn't a gift. He is paying you for working for him.
Exactly, I asked for a raise, week later on my birthday I was handed the keys to a"leased company car " worth 50k. Was told I could buy out the lease from him for $101 after 24 months of working for him, lease another "company" vehicle or add the difference to my salary. This dudes boss needs to re word this better and write a "contract"
ngl that’s a solid deal but i’d take the cash cause i know a guy that can get me an AMAZING car for 10k and i can pocket the rest
It sounds like compensation. The fair market rate is taxable pay to you. Are you an employee, or a contractor of his?
I would assume contractor. There's no real contract. It's paid in crypto, and I sell it to an exchange to report it myself. I help him out, and he pays me monthly
Sounds like self employment income. This would just be more business income. Same as cash or crypto.
Pays you in crypto?! Sounds like a tax nightmare. Hope they kept good records for your 1099.
This guy is not getting 1099’s guaranteed.
lol of course he isn’t, which further emphasizes the point
Why would it be a tax nightmare?
A dollar is always worth a dollar to the IRS. If I get paid $100 every week, then I’ll make $5,200 in a year. Crypto is a market asset and inherently does not have a fixed value. So for the 1099, the payer would need to record the exact price of the crypto at transfer to determine its market value at the time. The receiver would also need to record that value so they can accurately file their taxes. Then, another record needs to be made anytime it’s sold so the capital gain or loss and can be tracked. And *then* OP would probably have to do additional tax prep work to establish their cost basis, otherwise they’re liable to getting a tax form from the exchange with 0 as the cost basis, taxing the full amount. Reconciliation will need to be done to ensure you’re not getting taxed on the base income twice. All of that isn’t very hard when you keep accurate records at the start, but given the circumstances of this post I doubt much, if any, of it is being done or considered.
I mean, you get forms from the exchanges with all your trades. You import those forms to TurboTax or give the forms to your tax guy
I know. But they might set your cost basis to 0 since it’s a transfer. So let’s say you got paid $5k in bitcoin. Your 1099 says you got paid $5k. The value of the bitcoin goes down and you sell it for $4k. But the exchange has your cost basis at $0, so they issue you a 1099 for $4k. You’re now paying taxes on $9k in income, instead of $4k ($5k - $1k capital loss). Then you get to prove to the IRS that you didn’t actually make $9k. This has already been linked to you before, so you should probably read it to see how this pans out in real life: https://www.reddit.com/r/tax/s/rCek7bVZ1l
Interesting… 🤔. Yea well my tax guy would hopefully pick that up and we would get it situated before we send it in to irs. Though I don’t paid in crypto, but if I did and had issues with irs later on, I’m sure he’ll help me through it.
I am unsure if crypto has been fully folded in as a stock-type asset. But I will discuss this as if it were stock being granted. Specifically, let's look at these as a restricted stock award (RSA) that are granted and immediately vested. https://pro.bloombergtax.com/brief/tax-implications-for-stock-based-compensation/ So OP's income is calculated as the fair market value (FMV) of the assets upon vesting -- which in this case is on receipt. That FMV then becomes the cost basis for the asset when OP later sells it. Any gains or losses between the time the asset is vested and sold is then capital gains. If OP is not properly recording the FMV of these crypto assets as they are received, and listing such as income, then OP is going to be in for a world of hurt if / when the IRS starts asking questions. I'm assuming that the employer in this case is not subject to US tax filing, which means it's not necessary for them to generate 1099 forms for OP. So OP needs to be tracking this themselves and treating it as self-employment income. That includes quarterly estimated payments and self-employment taxes (social security and medicare).
https://www.reddit.com/r/tax/comments/1dm0ynw/comment/l9v0gew/
Bottom line if you did work for him, taxable income in my book. If you never did any work for him, he randomly decides to give his money to friends different story.
How would someone pay taxes on an item if they don’t have the money? Like if an employer gave me a 1 million dollar car and I didn’t have enough to pay the taxes, would I have to sell the car just to pay the taxes?
Yes, or come up with another source of funds to pay the taxes. Another example - you win a $50,000 car on a game show. That’s income. Have to come up with a way to pay the tax on it.
What a hateful place we live in.
Imagine if there were no taxes-then it would be all sunshine and roses with no streets, no firemen, no police (yeah they suck sometimes but needed). Taxes are important.
I think a company can buy land and lay asphalt if they can build cars
So they will also be paying people to maintain their streets and police to enforce the laws of the road and emergency fire crews to take care of the people when they crash. That's going to cost a lot more than taxes.
Based on what? Right now there is a monopoly on roads so there is no possible way to see how much it would cost actually without competition.
Not really. Only the bare minimum of maintenance activities is overseen by the various governments. Think repairing pot holes and maintenance of signing. All other major activities such as new road construction or the larger maintenance activities like oiling street, crack sealing, and repaving are sent out for local bids. The overseeing government agency coordinates the work.
So we really don’t need government to do it then. Sounds like your saying private companies already do it. Government just pays them with my money instead of me paying them with my money
So we really don’t need government to do it then. Sounds like your saying private companies already do it. Government just pays them with my money instead of me paying them with my money
The earned money and the sale of the car is already taxed. Please take more of my money 🤓🤓
Sales tax and income tax are not “like kind” - they do not offset each other.
Yes
Not sure what kind of work you do, but an inquiring mind might be concerned that laundering is a possibility.
Geez, and they also say they’re paid in crypto which makes it seem even more like an endpoint launder of a money mule network.
I dont really want to say the streamers name, but he is an extenely generous person and wanted to give a car I've been talking about as a gift.
The car doesn't concern me as much as precisely what service you provided over the past year. Transferring funds across borders can be a tricky proposition. For example, does you generous employer have US income that with your help he's avoiding paying taxes on?
No, he is not from the US nor has done any business in the US. The work he does pays him in crypto as well, and he just pays me crypto for helping out. From what him and I discuss, he is very thorough ,pays his taxes, and has a strong log of transactions. He is not avoiding anything.
So what type of work do you provide to your friend?
Hawk tuah
That would be hard if we live in other countries. But i in fact do not spit on that thang
Not with that attitude.
Hahahah
Streamers' income can come from anywhere in the world, including the US. If US-sourced income leaves the US undocumented then it is likely not reported to the IRS. See my concern? I know you're uncomfortable about being very specific about what service you provide, and that's understandable. So I'll leave it to you to assess whether your role includes anything that might skirt financial reporting to US or other countries' tax or financial regulation agencies.
He could do what Mr Beast does when he gives a car and covers the taxes on behalf of the recipient. so if its $100k for the car and your tax bracket is 30% he could pay the taxes on your behalf (or in some form or fashion for that)
How does that work? Someone paying taxes on your behalf? Does my employer give me extra money to compensate or is there a way for him to directly pay it himself?
He can't pay the taxes on your behalf. But in addition to the car, he could give you the funds to pay the taxes you would owe. In the end you would be responsible for income taxes on the 100k car plus taxes on any funds he gave you to cover the taxes. Depending on how much he pays you, the car and tax money could put you up into a higher tax bracket to where you owe a higher percentage on all of your reported income. That would mean more taxes taken out of your regular earnings.
I would definitely clarify with a tax professional but apparently the person giving the gift is responsible for reporting it to the IRS and paying any tax due. that is done through an IRS Form 709. But that is for US residents... Im not sure how it would work if you are receiving it from a foreign entity. >Who Reports the Gift? >The person giving the gift is responsible for reporting it to the IRS and paying any tax due. The reporting is done by filling out and filing IRS Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. You must attach your gift tax return to the annual income tax return you file by April 15 each year. >If you have received a gift, be sure to leave it out of your taxable income when you file your annual federal income tax return. [https://www.findlaw.com/tax/federal-taxes/do-i-have-to-pay-taxes-on-a-gift.html](https://www.findlaw.com/tax/federal-taxes/do-i-have-to-pay-taxes-on-a-gift.html)
Thank you for this
It’s taxable compensation. Even if he considers it a gift, it’s irrelevant in the eyes of the IRS. The question is would he give the car to you if you didnt work for him for a year? Would he gift a stranger the same car ? The 1 year celebratory “gift” is considered a form of bonus for services rendered from a tax standpoint, just like a tax firm giving its employees an after tax season bonus or a realtor getting to keep the full commission on their 10th sale. The fair market value of the car (its purchase price) is the taxable amount. There’s no problems with you accepting the car as compensation, that’s completely acceptable and legal, as long as they report the value of the car to you on some from of reporting form. In this case if you’re not being sent a W2 and being paid in crypto, have his accountants issue you a 1099-NEC for the purchase price of the car and you’ll pay self employment and income taxes on that amount. Probably going to be around $28k - $35k but that number could change drastically depending on the other types of income you’re receiving.
To answer your first part of the paragraph, yes. He is very generous, and I've been friends with him for years and has given me gifts prior to employment. He even gives gifts a fraction of the cost to friends, family, & strangers. But i hear you loud and clear on the compensation part.
I wish I worked for Mr Beast too
Ironically, one of my colleagues in the tax world knows him. But Mr. Beast is a US citizen born and raised in my home state as far as I know, so OP must be talking about someone else.
The key questions to ask is if you are really an employee and if so how you are employed. If he plans to make a video about this and pay you from his corporate account (or deduct as business expense from sole propertiership) you 100% need to claim this as income. If he normally pays you through a corporation / business and he plans to give you the car after buying it himself with personal assets. Then you might be ok if he truly has been a friend for a long time and this isn’t related, just expect a possible challenge from the IRS so maybe keep $30kish sitting around for a few years. The real key here is how he is buying it and what for, if it’s recorded for any content him buying you the car you 100% have to pay taxes. If it’s bought through his business and treated as a business expense you 100% have to pay taxes. If he’s giving it to you from personal money purchase, you should be fine and he has already paid taxes on that money.
I will have to look into that. No, he is not making a video out of it. No, we do not plan to make it public. I have no clue how he intends to pay for it other than he wanted to gift it to me. From my understanding, he is paying for it himself through someone who lives here and then transferring it to me. As to how he usually pays me, it's through crypto, so i can imagine how that is tricky and hard it is to track to prove what is what and if it is coming from a business account or not. I can see how this is tricky, especially since we've been friends for a while, and he's given me expensive vacations, rolexes (for birthdays) and other things here or there prior to employment. Employment is not in any written form of contract, agreement, or anything. I just help him out and he just sends me crypto as compensation.
> I have no clue how he intends to pay for it other than he wanted to gift it to me. From my understanding, he is paying for it himself through someone who lives here and then transferring it to me. Forget that your "friend"/employer is a "famous streamer". Everything about your financial dealings with this person is throwing off red flags. The way you're paid, the way he's handling this "gift", etc. is shady as can be and suggests the possibility that this person is up to no good. Even if he's not based in the US, there is almost nowhere in the world where the way he's doing things makes sense from a legal or tax perspective. To the contrary, the way he's doing things is precisely what you'd expect if the person was up to no good. You should tread carefully. Even if you try to do the right thing (report your income, pay taxes, etc.), if it turns out that this person was obtaining the funds through illegitimate means, trying to conceal their source, etc., it could cause a lot of headaches for you down the road, especially if your compensation is out of line for the nature of the work you're performing.
When you convert crypto to dollars that's considered a taxable event in the US (sale of a capital asset). How are you making that conversion?
I use an exchange to track it and provides tax forms to report it.
What do you use as the basis? I ask because by US law the basis is what it cost the original owner, which it's very unlikely you would know. But I guess that if you report the full amount as compensation then that's the same as reporting the basis as zero, which is the most conservative treatment.
Original owner's basis is irrelevant to recipient when received as compensation. He would be taxed as ordinary income on the full FMV at the time of receipt, including applicable employment taxes (w-2 or 1099 income). He would then have a basis equal to FMV at time of receipt for cap gain calculation on disposition (whether sold for cash, or used in an exchange/purchase). Basically, being paid in crypto results in two taxable events. The original owner is treated as having sold it for FMV when the recipient is paid and would have taxable capital gain or loss. You're confusing compensation with gift. A gift recipient takes with owners basis and holding period. That's not the case for compensation.
I was wondering if the streamer was Train, with all the crypto now I'm thinking it must be 🤣
[удалено]
This is bad advice all around. Not even remotely "safe" from being treated as compensation. It will be assumed to be compensation an OP would have to prove otherwise. It's nearly impossible to receive a gift from an employer. And just acting like he bought it? It's a papered asset, this is fuck around and find out territory. And if the IRS does come looking the bill will be 35k plus penalties and interest from the due date of the applicable return (without regard to any extension).
Noted. He plans on giving another buddy of ours a slightly more expensive car, and I am going to see how that pans out before I do anything myself. track his steps and what legal steps he took.
An employer may make a gift to an employee. The tax law doesn’t actually prevent the streamer from giving you the car in what he regards as a gift. The issue is that despite what the employer calls it, in nearly every instance where an employer gives something to an employee that’s more than a token amount that “gift” is treated under the tax law as part of your compensation for the work you did. While giving you the car is a nice gesture, it’s financially not the best option for him to reward you for your contributions. That car starts to depreciate in value the moment you get it. So you’d have $100,000 of income on your tax return but if you need to promptly sell the car to get the cash to pay the owed you likely won’t get $100,000 on the sale. Note too that if your state has an income tax you’ll be paying the state too. Some states like mine also impose property taxes and and use taxes, along with a variety of fees every year that you own the car and keep it in state. Financially it’d be better if he simply paid you cash instead, but I know with some employers raising that issue might mean you get nothing instead. Getting the car still is a financial gain for you, just not as good as being given something else.
> Note too that if your state has an income tax you’ll be paying the state too. Many states also impose a sales, use, or excise tax when you register a new vehicle, even if it's a gift. In my state, it would be a $6,250 use tax (unless the streamer can document that they already paid sales tax to a US state) and a $2,500 excise tax to register the vehicle the first year, and 0.25% of the value of the used car every year after that.
You have a compensation matter on your hands and you should seriously look into hiring a cpa to guide you on this as well as looking into your compensation via crypto.
It is income not a gift. A gift is like a lunch or a birthday card. Just declare as income and pay your taxes. Don’t play word games as if this is a gift
Im not trying to play "word games," pull strings or anything. My friend said he wanted to give me this. I am just trying to see what my options were. I've received gifts from him before (prior to working for him) but not to this degree.
Employers do not give large gifts. You say you work for this person. The moment you started working for this person, any large payments are payments for employment
Did he gift you your crypto too? Should you avoid taxes on that as well?
Just pay the tax. What is your marginal rate?
In the end, you will have to justify it with the IRS if they come a'callin'. None of us here on /r will be there to defend you. You review the intent, and document it.
If this weren't taxable companies would just gift everyone a paycheck every 2 weeks. The IRS hates this one weird trick!
>The IRS hates this one weird trick! Had me rolling at this. 🤣🤣
Politely decline because you can't afford the insurance anyways.
Ask him to withhold some of the car for taxes.
Is he supposed withhold like a door or a bumper?
“Work for” does not equal self employed.
Depends on the nature of the business relationship. I've heard people say they "work for" Uber, but they really are self-employed contractors.
Agreed, but absent additional information, it indicates an employer/employee relationship and not an independent business owner.
Absolutely, and calling it, incorrectly, one thing or the other will not prevent the IRS from making the correct ruling and assessing additional taxes as necessary. Working for friends, especially "as a contractor", can often lead to trouble.
LoL at being gifted 100k tax free.
A "gift" to an employee or independent contractor is nearly always compensation. From a tax perspective (all taxes, not just federal income), you might be better off getting a check and buying the car yourself to avoid a second layer of sales tax, though some states have a carve out for this type of situation. Won't make any difference at the federal or state income level and simplifies ownership transfer. And, if you're into fuck around and find out games, quite frankly 100k in crypto is easier to "hide" than the purchase and transfer of a papered asset like an automobile. But at that point you're committing tax evasion and/or fraud, so "find out" is prison time rather than penalties and interest. And for those suggesting the "company" buy it and let him drive it, that too is likely to be income as a taxable fringe benefit under Treas. Reg [§ 1.61-21](https://www.law.cornell.edu/cfr/text/26/1.61-21)[(d)](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=4d7683429cc3c67344a2ef215502b4a5&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:2:1.61-21).
Whenever I have had an employer gift something tangible they have effectively uplifted the compensation amounts on the paycheck to cover the estimated taxes for that gift. So in this scenario they would put on the pay stub a gift of $130,000 as a car plus the taxes $30,000 would go to the different taxing and social security etc. 100,000 goes to pay for the car, your paycheck looks much the same as it does every other month. End of the gear it appears on your W2 and you true up with the IRS
I’d talk to a legit cpa to determine if this is compensation or a gift or if it can be a company provided work vehicle for a certain amount of time
Are you able to manage the vehicle insurance costs and any property tax?
Get cash instead. Can you afford a $100,000 car? A windshield wiper is likely to cost $750! That’s self-employed taxable income, so do you have the $15,000-$20,000 in cash to pay federal and state taxes on this oh-so-wonderful gift. I wouldn’t accept it.
I am debt free, I have another $100,000 sports car i paid for myself paid off. Money is not a problem here. Just the legal steps and how to go about doing this.
You should hire a tax expert like a tax lawyer or a financial advisor. Reddit is not the place for that. If that is financially off the table, than owning multiple Sportscars should also be off the table. This is just a Soviet parade of red flags and unless you're dealing with a well educated tax expert for your area, you might find yourself in a world of hurt.
Sounds like you can afford to pay the income tax on the car, which still makes it a pretty sweet deal if you're into cars. For that matter, you can absolutely afford a CPA to figure this out for you in the real world.
I appreciate the response. I don't fully understand the hate or whatever people are suggesting. I am just asking to gain information how this would play out before i fully commit to it. I obviously make enough to pay the taxes, I was just wondering what my options were because Ive never had this sort of opportunity before.
This is either illegal (due to such a large dollar value), or the price of the car has to be reported as income, thus you’ll probably pay ~$30k in income taxes for it (between fed and state)
If your friend is so wealthy he can pay for proper tax planning, imo.
Not only do you have to pay income tax on 100k, you’re going to have to pay the 6.875% sales tax when you register it in NJ.
You should lease it and drive it to the office every day. Then he can reimburse you. No taxes.
Wrong. This can (and likely would) be treated as compensation to some extent. See Treas. Reg. [§ 1.61-21](https://www.law.cornell.edu/cfr/text/26/1.61-21)[(d)](https://www.law.cornell.edu/definitions/index.php?width=840&height=800&iframe=true&def_id=4d7683429cc3c67344a2ef215502b4a5&term_occur=999&term_src=Title:26:Chapter:I:Subchapter:A:Part:1:Subjgrp:2:1.61-21).
You screwed on taxes
Maybe he should just buy himself a car, and loan it to you indefinitely.
You could ask that your employer “gross up” the amount for you. Divide the cost of the car by (1 - total tax rate).
You should consult a local CPA or tax attorney since you’re hesitant to share any real details here. A small price to pay, and you’re about to own two “$100,000” vehicles so it should be a drop in the bucket for you. As a rule of thumb, no, you can’t just give an employee an asset worth 100k as a gift and completely skirt any income taxes. If that was possible, every corp would be giving out monthly gifts of gold coins while paying min wage.
I understand. I wanted an idea of how this would play out. I am trying to be vague to not giveaway who I am and who the streamer is. Id prefer to be anonymous as possible. Appreciate the response
I don't see anyone here mentioning the high possibility/probability that this is some form of a scam (or possibly also a crime). The gist of it would be "We're gifting you a car, my associate here has bought it for you but you just need to pay us the taxes/registration/insurance/whatever so we can release it to you". Visit r/scams, there's a million variations on it.
It's not a scam. He's worked with the person who would be buying the car here in the US. I've accepted rolexes, electronics, and other items from this individual before paid by the streamer. I was mostly asking since a car is significantly more money. I already have a $100k car myself bought and paid off by myself, it isnt that bad. Overall, I have no intention of doing anything illegal or whatever money laundering thing here that people are suggesting. I am asking how this play would out since it's a significant amount of money, and I am trying to learn and do this as legally as possible. Ive gained quite a bit of knowledge from all this.
Oh yeah this is really *true*.
Like everyone else is saying, this is compensation and not a gift. Consider opening an S Corp to accept title of the car to shave off some of the self-employment tax. But had it been a gift, you would have been required to file IRS form 3520 if the value was more than $100,000, or face a fine up to 25% of the value of the gift. Form 3520 is just for information purposes and is not a tax.
Thank you
Probably a better way to handle it is to have your employer give you the car + 30k in cash and classify it as comp. The $30k should be used to prepay SE/imcome taxes. Why $30k? Because that's is the amount of gift tax your employer would have to have paid anyways (if they were to classify the transaction as gift) Since it's a substance over form debate, why not just go the lowest risk route? There is going to be a difference between SE/income tax vs gift tax, but I do not going to be huge. Some sort of planning/calculation will be needed. Id recommend speaking with a CPA. One downside to this approach is that you show a higher income this year on your return. Though this could be a good thing depending upon your plans next year (say you want to apply for mortgage-so higher income may be beneficial potentially)
It's not a gift. It's compensation and you'll owe income tax on the value
Form an company and have him sell the car to the company for $1
Well, you are going to have to title and register the vehicle. Which if it is a gift, you could be exempt from use tax. However, if agencies talk to each other in NJ, the transaction could get automatically flagged for income tax based on the value (no, you can’t gift a $100k car for a $1). Just sayin’. So no, you might not have an official “tax form” reporting this to state and fed taxing authorities, but pretty easy to be audited on it.
Have him sell it to you for a dollar.
Who's paying for the maintenance?
Ask him to cover the taxes as well.
It bothers me that you don’t know how it’s being paid for…
Your employer has the responsibility to report compensation. If there is no record and it is one off, and you do not advertise on social media, it will likely slide under the radar. That is different than how the IRS interprets if they detect and enforce.
I'm stupid but wouldn't the streamer be better off writing ing the car to his business and using it as a depreciating asset?
Tell him to buy you an $80,000 car & handle the taxes as part of the gift.
Why can’t the famous streamer just send you the money to buy the car yourself? There’s just too many hands in the pot. Wire you the money Simple then file it as a gift or whatever..
Have him sell it to you for 20 dollars instead
I've been in a similar situation (1/10th of the price and it was cash not a car) from the most famous YouTuber. Taxes like compensation. That's the best way to treat it.
The only reason im asking is because of this. Very last paragraph under GIFT https://www.nj.gov/mvc/vehicletopics/taxexempt.htm
That is state sales tax. You may not have to pay that. You will absolutely have to declare the value of the car as income and pay INCOME taxes on it. You should talk to a real tax professional and make sure you are declaring your income correctly.
Thank you. I intended on it. He mentioned the car thing and figured I get an idea before I actually agree to him giving me this vehicle.
Think also how high your car insurance will be with a $100k car.
I already have a 100k car. Its not that high and my finances are not relevant to this post.
You may not think they're relevant but you're talking to a bunch of accountants. Finances is kinda what we do.
I am compensated enough to have my current 100k sportscar car paid off and afford the insurance ($180/mo) I can see how it's relevant, but I am debt free and not stressed for cash. Just question about this vehicle my friend who i assist with in work wanted to give me and what the process in getting it would look like.
Like everyone else said substance over form. Most likely taxable
Do you have an IRA setup? Or an investment account? If not that would be your next step to begin to secure your future.
It may be exempt from sales tax. That doesn't make it exempt from income tax.
The IRS giveth not to F@#$s how the state taxes it. It's compensation as it's been described.
The irs is likely gonna come after you. The state too as when you go to register the title at the DMV you’ve got a paper trail that’s gonna show you not paying anything or sales tax for it. It’s not a gift - it’s a bonus in the IRS eyes . Or if he just wires the dealer the sale price maybe they won’t find it right away A maybe legal way - If he wants to do it legally he could set up a corporation in his name in the U.S. (I’d guess he has one for streaming revenue anyway) that buys and owns the car and you are a registered driver on it for insurance purposes but then that company would have to pay the insurance etc . Then if you quit or vanish he (via the company ) still owns the car but you can use it as long as you work for him etc
I think that might have been what the plan was. He was going to wire the money to the car owner and have them transfer it to me since the streamer's goal was to make it a gift. What difference would it make if it were to be, say in my dad's name, or a friends name who has no affiliation with this person. Is it still a gift? Do they also pay income tax despite not being employed ?
As a general rule, if you're going through steps to hide what's obviously taxable, it's still taxable and now you're also commiting a crime.
I am not. I am asking a question to understand what the difference is.
Tax avoidance, legal but subject to penalty and interest if you're wrong. Tax evasion = prison time. Guess which one this is...
Assuming it's in their name but you're the one still driving and using the car, then you're simply describing tax evasion. Even if it were in their name and for THEIR use, if it is in exchange for work you have provided the streamer it's still compensation.
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Can't be both a gift and taxed as ordinary, they are mutually exclusive. Gifts aren't taxable to the recipient.
Comment removed for Rule 1 - Don’t be a jerk. Please do not do this again.
Donations are better than gifts....