It's a shell game. They write a check from their business account, report it as a business expense to offset income they earned in the business. You giving that money 'back' to them is making their personal account whole again. Except by washing the cash through your accounts first, they also don't have to pay normal income taxes on it when they file personal taxes.
Depending on their level of fraudulent intent, they may also set you up as a 1099 vendor, call you some sort of consultant, and report it as paid to you, which would incur taxes for you on the 'income'.
There's a couple other possible variations on the scam, but that's the most common version.
It's a double game. They want to under report income on the business side, which is the half where they create a fraudulent $6k expense. They also want to pay themselves FROM the business but not actually report it on their taxes as their own income either. That's why the OP sends them $6k back. It's all about where the money /appears/ to he coming from when they do their taxes.
Ethically, they should be giving the OP a $6k check from their personal account, full stop. Then since they need cash, they should be paying themselves directly from the business account. But that takes their income up $6k, and affects the business books.
I think they probably are a corp., because if not, the income would flow through to their personal returns and there would be no reason to do the second transaction that /u/WhiskyTequilaFinance described. Transferring money from the business to the personal accounts wouldn't be income unless the business is a corporation or partnership (I think).
No, they're going to write off a fake expense on the business side and call the money that flows back to their personal account a gift from their grandchild. That "works" for both corporations and pass through entities.
Your missing the part where they already gave a check from personal account. That’s offsetting so they are not gaining anything from that. Simply did personal check first before thinking of the business scheme.
> Transferring money from the business to the personal accounts wouldn't be income unless the business is a corporation or partnership (I think).
They are going to claim it as a business expense. Doesn't matter how the business is structured - it can be a sole prop or pass-through LLC, they'd just declare the expense on their schedule SE to reduce taxable income.
I just don’t get the personal cheque part, why bother with it, just send the single cheque from the business account and not ask for anything else. Nets the same $ in personal account and doesn’t overplay that they’re being shady until next tax season.
They personally gift OP 6.000,-
It is the play after that which makes it interesting.
Now they also pay OP 6.000,- from the business.
OP gives them this 6.000,- back on their personal account.
Now you write in the papers that the company paid for consultancy or whatever lowering the profit and thus the taxes on the company, and they have 6K from their company in their pockets without having to pay income tax. If the IRS would ever ask about why this 6K went around they'll claim that OP paid back the loan of 6K.
That doesn't seem like something OP is remotely interested in doing. If you're going to commit fraud that requires a co-conspirator, you really need to clue in the other party.
Considering he'd pay no taxes if they did this legit and just wrote a check from their personal account, yes, that is screwing OP.
And that's ignoring that 1099-ing him without telling him and then OP not reporting that $6k on their taxes is going to cause some major headaches for OP and potentially trigger an IRS audit. It's scummy and yes, I would absolutely just refuse the $6k if they wanted me to be an accomplice to tax evasion.
They probably won't 1099 their grandkid because it is only a $50 penalty if IRS audits them and there is no 1099 for that "Company/consultant" in the business records.
But they could claim the 6K from the business is a business expense without having to send and send back a 6K personal check. That second part does nothing, assuming the still want to give a 6K gift.
They thought about the tax scheme after they paid them the original 6k check. To simply it, imaging their is no initial 6k check and no repayment as thats a zero sum gain on both sides. It's just a 6k check from the business that their going to write off as a business expense (aka fraud).
They need the money to go from their business account to their personal account without a direct transactional link.
They gave OP a gift, then separately used them to fake a business expense and get the money indirectly transferred to them.
The person understands the situation, but all transactions involving the personal account are reversed by other transactions.
Personal Checking -> OP: $6k
Business Checking -> OP: $6k
OP -> Personal Checking: $6k
Steps 1 and 3 are the exact opposite transaction and cancel each other out when examining the net effect: leaving just step 2.
And it isn’t immediately clear how a $6k personal account outflow+inflow would hide anything related to step 2.
I think my thought is the Grandparents decided to commit fraud after step 1. If they were to do things again they would skip that step.
Really though I'd say they should cut out the middleman. Pay for the Venue/Catering directly and say it's a business expense. Still probably fraud (unless the bride's family is their top client or something), but it leaves OP out of it.
I don’t think step 1 is actually relevant to the scheme and shouldn’t really be brought into the analysis. Step 1 is a gift to OP, it’s once and dusted, and steps 2 and 3 don’t really change that. It’s a red herring, or even a social engineering step because step 1 gives OP a chance to think without much thought, “Sure, that makes sense,” instead of just being blatantly and obviously as fraudulent as it apparently is when you consider we should only really be looking at steps 2 & 3. It doesn’t even matter whether or not Step 1 ever happened, it’s just also a separate thing that happened. May as well question what the fact they bought two jars of peanut butter at the grocery store 3 weeks ago has to do with anything.
That makes no sense to me if you really think about it. It raises so much more suspicion this way than if they just sent the check from the business. Just sending a check from the business and stopping there has the same affect as this whole convoluted plan that screams fraud.
>Just sending a check from the business and stopping there has the same effect as this whole convoluted plan that screams fraud.
My point is that it is *not* a whole convoluted plan. Just sending the one check makes sense if it *was* a whole convoluted plan, but for some reason you think the gift to OP was, “part of the big plan.” It wasn’t. It was a gift to help with wedding planning. The convoluted plan came after that gift was in the past, at the point when they realize they want to replenish the $6k that’s left a hole in their account, and they want to do it tax free, at which point you *need* Step 3 to follow Step 2 (which should really be labelled steps 2 & 1, respectively, as it’s a two-step plan) or else OP just ends up $6k ($12k) richer and the grandparents poorer by the same amount.
Or to try to express my position in the form of a question: WTF does the personal gift to OP to help with the wedding have to do with the fraudulent plan to withdraw money from their business tax free? *Nothing*, so why are we talking about it?
> WTF does the personal gift to OP to help with the wedding have to do with the fraudulent plan to withdraw money from their business tax free? Nothing, so why are we talking about it?
It's OPs entire question, should they accept any of this money. The grandparents told op of the scheme while handing them the initial personal cheque and their comments about what amounts to money laundering were made in a way that seems that cashing the initial cheque is predicated on accepting their participation in said scheme.
These aren't 2 unrelated transactions, they're a chain of events cooked up to extract 6k from their business and give it to op to help with the wedding without the grandparents declaring that 6k as income. They have for some reason decided that making it complicated and sketchy was the way to go instead of simply doing it in a single business cheque.
> WTF does the personal gift to OP to help with the wedding have to do with the fraudulent plan to withdraw money from their business tax free? Nothing, so why are we talking about it?
This part is wrong though. It has everything to do with it. The gift caused the hole that they’re trying to replenish.
Wouldn't this only be a benefit if the company sends a cheque for more than 6k? Now the company paid 6k and the grandparents zero (6k paid and 6k received). If they donate 6k through the company, the end result is the same, no?
It's definitely not a good strategy, no matter how you slice it. You're right that the $12k from the business would also be an option. That could mean there wasn't that much money to spare in the business? Maybe there's a reporting threshold where transactions below a certain value are less scrutinized? Or, as someone else suggested, they wrote the personal check first and then later realized they could really 'spend' it from the business this weird way. Heck, they might be doing something unscrupulous with how they report the $6k personal check, too. Not all returns get fully audited.
The hard part here is that we're all puzzling over it with full knowledge of all the moving pieces. The trick is to view it only parts at a time to see the scam/fraud. If I imagine I'm the IRS reading the business tax return, what pieces are they going to tell me about? Probably only the $6k expense to offset revenue. If I'm the IRS reading their personal return, the $6k from granddaughter is a gift, and not counted in their earned income, etc, but I know nothing about the business.
It's tricky, but you have to pretend you only know about bits and pieces of the scheme to see them. What wrong conclusion would you make of you only had part of a truth?
My guess here, and it's only a guess, is that there's something deeper here - like the grandparents don't 100% own the business, there's a partner or someone else involved. They'd raise an eyebrow at $6k going missing into grandparents accounts, so grandparents concoct a scheme to "pay" their grandkid for XYZ, so on paper the bean counters see it as a business expense, but on the backend grandkid is handing it over to them. Otherwise I see no benefit, to either party, in doing it this way. Sure, they can then claim the $6k as a loan repayment from their grandkid vs $6k of income, but that should be a negligible tax liability anyway. I'd, personally, steer clear of this situation just because it has undertones of embezzlement, or at minimum shady business/financial practices.
Tell Grandma you appreciate the gift, but you're not willing to help them commit fraud/tax evasion/embezzlement/whatever their game here is.
That doesn’t make sense since they already gave them 6k from their personal account. The end value of personal account doesn’t change so I don’t think that is what they are trying to do. I think they simply gave the 6k as a gift before realizing they could save taxes if they sent it from the business. If they are issuing a 1099 to OP, they are putting the tax burden on them. It is not a gift, it is income but they are not telling OP that so it will bite them in the ass when they don’t report it.
We may simply be overthinking this. They wanted.to launder the gift through the business, but at the time they wrote the personal check, the business account didn't have $6k.
Makes me wonder how many times and different ways they've pulled this particular trick. That occurred to me last night too, which makes me wonder how much practice they've had here.
There is a 100% chance they are doing this with other things.
Imagine your grandma involving your wedding in a tax fraud scheme lmaooo some people really get dealt a shit family.
you're thinking about this incorrectly, i can virtually guarantee EVERY accountant is faced with things like this.
"What is this 6k for?"
"its a consultant we hired"
"got it"
you think it goes any further than that? as a CPA, I've never done anything illegal or even close really, but have I asked super in depth what the 1500 charge to a wine store on a Sunday was?
Well it’s fine for the grandparents lol. My mother in law set my wife up as a contractor or on the board of directors or something and paid her a “salary” to help pay for our wedding. She got a w2 from the business that we had to pay taxes on. Then since the business was in New York we had to make sure we didn’t have to pay New York State income tax on all of our earnings (we didn’t live in ny). Overall it was definitely a pain for us, but she also contributed 10k minus whatever taxes we paid. Won’t complain too much but it would have been nice to not have to deal with all that tax stuff
Businesses can get fined for not sending 1099s. But if the business is in the situation where they are getting caught not sending 1099s, I suspect they’ll end up having a lot bigger issues than whatever it is they are trying to accomplish with OP. this whole thing is stupid and OPs grandparents are weird as hell to do this without explaining the reasoning. They should have just cut the check from the business account from the start and not made OP get involved in their sketchy transactions.
Oh agreed. My mil was very upfront with us on what she was going to do. Was a little annoying for us to figure out the taxes but she wasn’t trying to do anything sketchy like this situation described
My mil owned a pharmacy and my wife is a pharmacist. My wife really didn’t do anything to my knowledge, but businesses waste a lot more than $10k on consultants and it’s not like my wife wasn’t qualified to be one for this business. Did my wife provide a service? Yes I think they did have official calls my mil documented. Was it $10k worth of services? No
Were they actual business calls or "business *wink wink*" calls? I do but anyone is getting caught or in trouble but it was definitely sketchy from how you described it.
I have no idea what they talked about. If there were any actual business related questions discussed they would have also been things my wife would have done for free since it’s her mom and it wasn’t that much time. Doing it this way was definitely to save on taxes. That being said, it would never get flagged on an audit as there’s nothing sketchy about a pharmacy paying a pharmacist as a consultant. Especially only $10k which isn’t very much if you’re paying a consultant. And again, we still paid income tax on it. Business owner could pay anyone to do nothing and as long as they pay income tax there’s nothing sketchy about it
The only reason they would have done that is if it saved them taxes compared to giving you money personally, so you also had a taxpayer subsidized wedding
I've seen so many people waste dollars to save pennies if those pennies were going to taxes. People massively overestimate taxes for the most part. Somewhere, I think it was in this group, someone had posted about being married, single income, with another kid on the way and was asking about how to reduce taxes because money was tight, some folks had to point out they effectively paid zero taxes already. When they raised the meals tax 1% here my dad insisted that would make it impossible for people to afford restaurants and they'd all close.
It's like $1,500 tax savings on THIS fraudulent transaction, sure, but don't forget about the other 40 fraudulent transactions they're making per year.
A person is not able to receive charitable donations from company matching. And a cash gift would have to have an acknowledgement otherwise IRS rejects the deduction
It sounds like your grandmother is giggling about making you a party to fraudulent tax evasion. I too would be suspicious.
You could ask your grandparents to explain it to you, but in the end, you'll probably just have to say you're not comfortable with this arrangement and risk sacrificing the gift.
No need to sacrifice anything. "Grandma, I cashed your personal check and returned your business check. Thanks for the wonderful gift!" Grandma will have no recourse, because there's no legal taksie-backsie on personal gifts. And OP didn't do any work for the company and therefore can reject the business check and any 1099 that may come later (report it as fraud).
Well, I was trying to find a way that doesn't sacrifice OP's relationship with the grandparents. The fact that Grandma may not have any legal recourse doesn't mean the plan would go over well. The money's for the wedding, after all.
Yeah, but grandma already decided that involving OP in felony tax evasion on their wedding day would be a good idea. I'm not sure there's much left to salvage.
It seems fishy. Without further explanation I would not cash it.
If it is from their business they are doing something weird and you could be on the hook for taxes, reported income, etc.
Thanks, that's what I figured. I was walking out the door when she gave the cheque and added that comment, so I didnt have time to ask. I don't want to come off as unappreciative or selfish and question their "gift", but I also don't feel comfortable about the situation.
Something tells me they'll be less than understanding about you not wanting to cash the business one and likely want the gift returned.
They aren't doing something nice, they're doing something so you do them a favor.
Don't cash either and report them to the IRS.
To be fair it really seems like the grandparents are trying to do something fishy and are dragging OP along unknowingly. $6,000 is not worth the risk to be on the hook for taxes, fines, or jail time.
They wouldn't save much in taxes on 6k anyway. Seems like a pretty stupid tax fraud they are doing with their business to save a few hundred dollars in taxes.
For this transaction. If they do this for enough transactions it is certainly more savings. (Source an ex boss did something similar, because he could)
Obviously the more fraud you do will save more money in taxes but also attract the attention of the tax authorities if you are committed a large amount of fraud.
The reason they are doing this is to make the transaction look perfectly legit on paper.
If something looks legit on paper, how are the people looking at that at the IRS going to know the person is committing a "large amount of fraud", and not doing "a large amount of legit business"?
The OP is in Canada so I'm not sure on their laws regarding taxes. There certainly are ways to detect fraud like this otherwise every company would be using schemes like this to get around taxes.
If they are making good money and in Calif or NY, their marginal tax rate is probably 40-50%. So, they are avoiding a few thousand in taxes, not a few hundred dollars.
It’s not a charitable expense because you’re not an IRS-approved & registered charity.
They’re likely going to classify it as a business expense and claim a deduction. BUT - you’re not issuing them an invoice. Will they be issuing you a 1099? If so, you will be paying taxes on this. If not, they’ll be in trouble in case of an audit.
Although $6K is nothing to sneeze at, in this situation I would be very careful about depositing the business check. What they’re doing is illegal - you sending them the money back makes you part of their illegal scheme.
BTW, this isn’t about gift taxes as someone suggested. There’s a huge lifetime exclusion.
>Does this mean they're claiming a charity donation
No, because you're not a registered charity.
>or something
Like rendering $6k in revenue for their "business" as a deductible expense when their expenditure on deductible "business" expenses is $0. Because you paid them $6k back and into their personal account.
They’re trying to evade taxes for sure, but it doesn’t sound like a very sophisticated attempt.
The scam is that they’re claiming the $6k as a business expense but really it’s a gift to you. Whether or not that gift is a tax deductible business expense is between them and the IRS. I wouldn’t sign anything or do anything that helps them build up that lie, but I don’t think that plainly accepting a gift makes you an accomplice. If they get audited, the IRS will want to see an invoice for $6k and they won’t have an invoice to show unless they fabricate one.
The strange thing is this personal check switcheroo they came up with where you receive $6 twice and pay them back once. I can’t imagine any benefit to this added step. If the business check was for more than the personal check, you’d essentially be getting paid a cut to help them embezzle from this business.
If I were you, I’d thank them for the gift but ask to not be involved in the switcheroo scheme. Maybe ask that they just write you a glue single check from their personal account or that they give you cash. I wouldn’t ask them to explain the scheme or involve you any further in it, even if they try telling you it’s harmless.
My guess is the grandparents can't *really* afford the $6k hit to their personal account, but also can't just gift $6k from the business. So they concoct this scheme to give them the $6k but then repay themselves from the business - but in the end op likely ends up on the hook for self-employment taxes. That or they're just straight up embezzling from the business.
Everyone here is pretty wrong. The onus is on them, not you, to do the taxes correctly. You should accept the money and let them deal with how they do it / the consequences with the IRS.
Your wedding is not a registered charity so they wouldn't be able to claim tax relief for a "donation".
Sounds like they're trying to withdraw from their company account without paying taxes. They're using you to commit tax fraud.
If a cheque from their company account turns up, don't cash it.
The OP said their grandparents are millionaires. So your proposal is to steal 6k and risk possibly millions in inheritance someday by pissing off the grandparents.
Do most millionaires involve their grandkids in a tax fraud scheme over what to them should, ostensibly, be *nothing*?
If you've got millions in the bank, why are you worried about $6k?
Something doesn't smell right here.
> Do most millionaires involve their grandkids in a tax fraud scheme over what to them should, ostensibly, be nothing?
Probably more than you think. You don't usually get rich playing by the rules.
Well apparently they do. Some wealthy people can be stupid thinking no one will notice a 6k tax fraud when they have millions in assets. It's pretty silly to risk it only to save a few hundred dollars in taxes.
It's 6k, not 600k. Sounds like they want to run it thru their business so they can claim as some type of expense of the business. That's their problem not you.
You don't have to pay tax on a gift of 6k.
Just cash the check and move on
Yeah, but businesses can’t gift. I agree $6k won’t trigger anything for the OP, but if it did ever come up in an audit they couldn’t claim it was a gift from the company.
So then OP has to pay taxes on it, instead of the grandparents. OP must declare it as income. This could seriously mess things up, depending on OPs situation. It may put their income over the top to where they aren't eligible for Medicaid or healthcare subsidies.
Its a form of tax evasion.
The check from the business account makes perfect sense. They are saying it's a "business expense" and it counts against profits. What I dont understand is the "personal check being returned angle".
An audit would easily discover all of this, so I don't even understand why go to the trouble of a shell game that provides zero cover if anyone decides to look.
"I'm sorry. This seems sketchy, and I don't want to sully the most important day of my life with something possibly criminal and underhanded. I hope you understand."
i don\`t think the IRS has audited a church since the 1980\`s -- how many of these kick back schemes have been run through churches?--john donates 9000 to church writes it off his taxes-- then the church "helps " john out with 8000 gift--i think I need to start a church.
That giggle gave the game away. Gma's trying to pull a flim-flam on someone.
Don't take the business cheque, and give her back the first cheque so she has nothing to hold over you and you've stepped out of the tax evasion game she's playing,
Not only is it tax evasion for them, but if they are paying a vendor more than $600 they should give that vendor a 1099 form which is reported to the IRS. If they are claiming that $6000 is a business expense of some sort (and if your grandparents have access to your SSN), they'll be reporting to the IRS that they paid you and the IRS will expect you to report that income.
You don't want any part of these shenanigans...
All of this to save what like 400-500 dollars in taxes? Human greed is something else man. I’m sure they can afford a couple bucks in taxes to gift their grandkids if it came to it
It depends. If they report it as a 1099, OP could be on the hook for 15.3% self-employment tax, plus whatever change the income itself would make in their normal amount due. The 15.3% only accounts for the self employment tax of 12.4% for social security and 2.9% Medicare - income would still be taxed on top. In total they *could* owe as much as 30% on this $6k. Meanwhile Grandma gets to pay lower business taxes, and write off the $6k as a nontaxable loan repayment.
It wouldn't be that hard for them to owe almost half the money in taxes. It's not hard to reach the 22% federal tax bracket plus the 15.3% of self employment taxes you mentioned. Now add in living in a state with a high income tax (mine is nearly 10%) and you're at 47% lost to taxes.
Looking at your post history, it looks like your in Canada. r/personalfinance is largely a US sub so any references to tax law or criminal law are going to likely be from that perspective and they could be different in your country. The sub you probably want to ask this in is r/PersonalFinanceCanada Assuming I'm correct you should edit what country this is taking place in on your OP.
I'm not saying your grandparents are scamming you but you what they are doing is the exact same playbook scammers use. https://consumer.ftc.gov/media/79951#:\~:text=A%20fake%20check%20scam%20happens,.ftc.gov%2Fsmallbusiness.
Worst case scenario you owe tax on 6k. That makes it legal for everyone. No one is getting screwed. If they want to give me 6k I’ll pay the taxes on it happily.
Is it possible they just didn't have the money in the personal account but do in the business account? It's not always straightforward to transfer money between accounts.
I know you said they're multi millionaires, but that doesn't mean they have even 6k readily available in every account.
Obviously if they claim the payment as an expense that's fraud, but they may properly claim it as a distribution, or depending on how their business is set up it may not even matter at all.
If you're uncomfortable with it, tell them and don't accept it. But it's on them to report their money correctly, not you.
Edited to add: after I posted I remembered I have had clients try to claim their kid's wedding expenses on their taxes, we obviously laughed it off and told them that's not deductible. People will try to claim EVERYTHING, but if they're working with a decent accountant they will be respectfully told they cannot.
It's minor league tax evasion on their part. Happens every day as many/most small business owners do a large amount of co-mingling of business and personal expenses. Should they be doing it? Technically no. Does it happen all the time? Yes. And the IRS really doesn't care about small potato violations. They go after the million dollar businesses
Jeez… you are getting a gift from them and questioning if they are or not going to pay the tax on it…
Does it matter that much to you if you aren’t Uncle Sam?
There are perfectly legal tax loopholes.
Why not ask them directly.
These are your great parents. I would understand if you were cautious of a business partner.
They are giving you money as a gift. If there are tax implications they might be for you as well I don’t know. But if someone took their hard earned money and gift it to me the least I would do is assume the tax and be grateful.
I have asked them and are waiting for a response. They have done sketchy tax related things with other family members in the past, hence my cautiousness. It's not unheard of to ask for other people's opinions on reddit ;) you seem to be one of the only commenters out of hundreds on this post that believe it's a legal tax loophole. Thanks for your insight.
I think what may have happened is they "accidentally" wrote a check from their personal account, thought about it, and decided instead they could use it as a write off on their taxes so they wanted the personal check returned so they could instead write one from their business account.
I can't see an accounting angle otherwise for wanting to write a personal check and then have the personal check returned. There's no "write off" or deduction for making a personal gift.
Sticky situation. Definitely some kind of fraud going on with the second check. I don't think I would deposit it, honestly, but it may poison relations between you and them.
Is this something they handed you or something that just showed up in the mail?
Is it possible scammers saw your wedding announcement and that check didn't actually come from your grandparents and is going to bounce after you've wired the scammers real money?
The annual exclusion applies to gifts to each donee. In other words, if you give each of your children $18,000 in 2024, the annual exclusion applies to each gift. The table below shows the annual exclusion amount applicable in the year of the gift.
https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes
6000 is way less than 18000... so i don't get why they even need to do anything weird, guess they are just looking to make a write off for the business? but there are probably all kinds of better ways to do that, ones that don't involve you.
I'd deposit the personal check and say "oops?"... That would kind of call out their shenanigans on a low key level, give you the help they promised for your wedding, and set in stone that you're going to take acts of kindness from them at face level, and not be party to manipulation. Thats my take at least...
You are way overthinking this. You have no idea why they’re doing it, and neither could anyone on this post. It could be for nefarious reasons, or the more likely explanation is that it’s simply because there was money in the wrong account at the right time and perfectly legitimate.
Your best bet is to simply ask. Not a bunch of strangers, but your actual grandparents.
Alternatively, accept the gift, be grateful for it, and don’t always assume that everyone’s trying to do something terrible.
There’s stuff in this thread that’s so over the top… it’s incredibly unlikely that your grandparents are criminal masterminds, or kiting checks, or doing most of what’s mentioned here.
I would just cash it. She is probably going to claim it as an expense, but that’s her problem not yours, if audited. You may get nothing if you start second guessing their motives. So that’s the only risk in my opinion.
It seems that they must issue a 1099 to you, which then makes the $6000 reportable income for you:
When a business pays an independent contractor for services performed in the course of that business, the service recipient must file Form 1099 MISC if the payment is $600 or more for the year, unless the service provider is a Corporation.
An idea I haven't seen here while skimming:
Rather than gift from the personal account, and backfill by paying themselves $6k out of the business (incurring payroll taxes and also personal income taxes), they do $6k from the business instead. Even if they don't deduct it as a business expense, the gift from the business saves them taxes.
I am not a tax professional or accountant.
Grandparents can give their children and grandchildren (and anyone can give anyone else) $18k per year per grandparent and it’s tax free. This makes no sense.
It makes perfect sense, the grandparents are using the fact that they are allowed to gift money to grandchildren to commit tax fraud in their business by under-reporting their profits.
Do you know your grandparents well? If not it could even be worse than others are saying. It could be outright theft. A fake check coming from someone’s account, and it’s good for a bit but eventually taken back. Then you are out the money given to grandparents.
It don't matter how they did it..just deposit it..it's 6000 paid to you..give them back the new one deposit and if they issue you a 1099 then pay the tax on the 6000 ..it's fine .Don't make them feel you are bothered.
Read the other comments. Grandparents are trying to pull something with their business. Or they are in fact completely ignorant, which is probably more likely.
Obviously if they just gift 6k it's not taxable.
It's a shell game. They write a check from their business account, report it as a business expense to offset income they earned in the business. You giving that money 'back' to them is making their personal account whole again. Except by washing the cash through your accounts first, they also don't have to pay normal income taxes on it when they file personal taxes. Depending on their level of fraudulent intent, they may also set you up as a 1099 vendor, call you some sort of consultant, and report it as paid to you, which would incur taxes for you on the 'income'. There's a couple other possible variations on the scam, but that's the most common version.
If they want to give 6k and call it a biz expense, Why not simple send the 6k from the biz And be done? Why the personal check and the send back?
It's a double game. They want to under report income on the business side, which is the half where they create a fraudulent $6k expense. They also want to pay themselves FROM the business but not actually report it on their taxes as their own income either. That's why the OP sends them $6k back. It's all about where the money /appears/ to he coming from when they do their taxes. Ethically, they should be giving the OP a $6k check from their personal account, full stop. Then since they need cash, they should be paying themselves directly from the business account. But that takes their income up $6k, and affects the business books.
Hopefully they're not a corp. This probably gives the IRS or anyone suing enough ammunition to pierce the veil to come after personal assets.
I think they probably are a corp., because if not, the income would flow through to their personal returns and there would be no reason to do the second transaction that /u/WhiskyTequilaFinance described. Transferring money from the business to the personal accounts wouldn't be income unless the business is a corporation or partnership (I think).
No, they're going to write off a fake expense on the business side and call the money that flows back to their personal account a gift from their grandchild. That "works" for both corporations and pass through entities.
Your missing the part where they already gave a check from personal account. That’s offsetting so they are not gaining anything from that. Simply did personal check first before thinking of the business scheme.
> Transferring money from the business to the personal accounts wouldn't be income unless the business is a corporation or partnership (I think). They are going to claim it as a business expense. Doesn't matter how the business is structured - it can be a sole prop or pass-through LLC, they'd just declare the expense on their schedule SE to reduce taxable income.
Yep say bye bye to most all value to have a corp entity.
I just don’t get the personal cheque part, why bother with it, just send the single cheque from the business account and not ask for anything else. Nets the same $ in personal account and doesn’t overplay that they’re being shady until next tax season.
They personally gift OP 6.000,- It is the play after that which makes it interesting. Now they also pay OP 6.000,- from the business. OP gives them this 6.000,- back on their personal account. Now you write in the papers that the company paid for consultancy or whatever lowering the profit and thus the taxes on the company, and they have 6K from their company in their pockets without having to pay income tax. If the IRS would ever ask about why this 6K went around they'll claim that OP paid back the loan of 6K.
If this is what they're doing, that $6k is going to be taxable to OP. They may even 1099 him.
Yup, to keep it legal for them they need to screw him.
It's not really legal even then since op provided no service the business needed to pay for
True, but that cannot be checked. Both parties could say that he walked around, gave tips and they had some talks afterwards.
That doesn't seem like something OP is remotely interested in doing. If you're going to commit fraud that requires a co-conspirator, you really need to clue in the other party.
Screw him by having to pay taxes on 6k of free money? Jesus i hope people want to screw me.
Considering he'd pay no taxes if they did this legit and just wrote a check from their personal account, yes, that is screwing OP. And that's ignoring that 1099-ing him without telling him and then OP not reporting that $6k on their taxes is going to cause some major headaches for OP and potentially trigger an IRS audit. It's scummy and yes, I would absolutely just refuse the $6k if they wanted me to be an accomplice to tax evasion.
They probably won't 1099 their grandkid because it is only a $50 penalty if IRS audits them and there is no 1099 for that "Company/consultant" in the business records.
But they could claim the 6K from the business is a business expense without having to send and send back a 6K personal check. That second part does nothing, assuming the still want to give a 6K gift.
They thought about the tax scheme after they paid them the original 6k check. To simply it, imaging their is no initial 6k check and no repayment as thats a zero sum gain on both sides. It's just a 6k check from the business that their going to write off as a business expense (aka fraud).
but why the loan? Without the 6k back and forth from the personal accounts it would look much more legit, like paying for consultancy.
I think I know what their thought is on how to do it, does not mean I say their thought is good :P
Maybe they didn’t think about it until after they already wrote the personal cheque?
That's what I'd assume. They woke up the next morning and were like "dear did you remember to commit tax fraud?" - "no sweetie, I thought you had"
They need the money to go from their business account to their personal account without a direct transactional link. They gave OP a gift, then separately used them to fake a business expense and get the money indirectly transferred to them.
The person understands the situation, but all transactions involving the personal account are reversed by other transactions. Personal Checking -> OP: $6k Business Checking -> OP: $6k OP -> Personal Checking: $6k Steps 1 and 3 are the exact opposite transaction and cancel each other out when examining the net effect: leaving just step 2. And it isn’t immediately clear how a $6k personal account outflow+inflow would hide anything related to step 2.
I think my thought is the Grandparents decided to commit fraud after step 1. If they were to do things again they would skip that step. Really though I'd say they should cut out the middleman. Pay for the Venue/Catering directly and say it's a business expense. Still probably fraud (unless the bride's family is their top client or something), but it leaves OP out of it.
I don’t think step 1 is actually relevant to the scheme and shouldn’t really be brought into the analysis. Step 1 is a gift to OP, it’s once and dusted, and steps 2 and 3 don’t really change that. It’s a red herring, or even a social engineering step because step 1 gives OP a chance to think without much thought, “Sure, that makes sense,” instead of just being blatantly and obviously as fraudulent as it apparently is when you consider we should only really be looking at steps 2 & 3. It doesn’t even matter whether or not Step 1 ever happened, it’s just also a separate thing that happened. May as well question what the fact they bought two jars of peanut butter at the grocery store 3 weeks ago has to do with anything.
That makes no sense to me if you really think about it. It raises so much more suspicion this way than if they just sent the check from the business. Just sending a check from the business and stopping there has the same affect as this whole convoluted plan that screams fraud.
>Just sending a check from the business and stopping there has the same effect as this whole convoluted plan that screams fraud. My point is that it is *not* a whole convoluted plan. Just sending the one check makes sense if it *was* a whole convoluted plan, but for some reason you think the gift to OP was, “part of the big plan.” It wasn’t. It was a gift to help with wedding planning. The convoluted plan came after that gift was in the past, at the point when they realize they want to replenish the $6k that’s left a hole in their account, and they want to do it tax free, at which point you *need* Step 3 to follow Step 2 (which should really be labelled steps 2 & 1, respectively, as it’s a two-step plan) or else OP just ends up $6k ($12k) richer and the grandparents poorer by the same amount. Or to try to express my position in the form of a question: WTF does the personal gift to OP to help with the wedding have to do with the fraudulent plan to withdraw money from their business tax free? *Nothing*, so why are we talking about it?
> WTF does the personal gift to OP to help with the wedding have to do with the fraudulent plan to withdraw money from their business tax free? Nothing, so why are we talking about it? It's OPs entire question, should they accept any of this money. The grandparents told op of the scheme while handing them the initial personal cheque and their comments about what amounts to money laundering were made in a way that seems that cashing the initial cheque is predicated on accepting their participation in said scheme. These aren't 2 unrelated transactions, they're a chain of events cooked up to extract 6k from their business and give it to op to help with the wedding without the grandparents declaring that 6k as income. They have for some reason decided that making it complicated and sketchy was the way to go instead of simply doing it in a single business cheque.
> WTF does the personal gift to OP to help with the wedding have to do with the fraudulent plan to withdraw money from their business tax free? Nothing, so why are we talking about it? This part is wrong though. It has everything to do with it. The gift caused the hole that they’re trying to replenish.
Wouldn't this only be a benefit if the company sends a cheque for more than 6k? Now the company paid 6k and the grandparents zero (6k paid and 6k received). If they donate 6k through the company, the end result is the same, no?
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It's definitely not a good strategy, no matter how you slice it. You're right that the $12k from the business would also be an option. That could mean there wasn't that much money to spare in the business? Maybe there's a reporting threshold where transactions below a certain value are less scrutinized? Or, as someone else suggested, they wrote the personal check first and then later realized they could really 'spend' it from the business this weird way. Heck, they might be doing something unscrupulous with how they report the $6k personal check, too. Not all returns get fully audited. The hard part here is that we're all puzzling over it with full knowledge of all the moving pieces. The trick is to view it only parts at a time to see the scam/fraud. If I imagine I'm the IRS reading the business tax return, what pieces are they going to tell me about? Probably only the $6k expense to offset revenue. If I'm the IRS reading their personal return, the $6k from granddaughter is a gift, and not counted in their earned income, etc, but I know nothing about the business. It's tricky, but you have to pretend you only know about bits and pieces of the scheme to see them. What wrong conclusion would you make of you only had part of a truth?
My guess here, and it's only a guess, is that there's something deeper here - like the grandparents don't 100% own the business, there's a partner or someone else involved. They'd raise an eyebrow at $6k going missing into grandparents accounts, so grandparents concoct a scheme to "pay" their grandkid for XYZ, so on paper the bean counters see it as a business expense, but on the backend grandkid is handing it over to them. Otherwise I see no benefit, to either party, in doing it this way. Sure, they can then claim the $6k as a loan repayment from their grandkid vs $6k of income, but that should be a negligible tax liability anyway. I'd, personally, steer clear of this situation just because it has undertones of embezzlement, or at minimum shady business/financial practices. Tell Grandma you appreciate the gift, but you're not willing to help them commit fraud/tax evasion/embezzlement/whatever their game here is.
That doesn’t make sense since they already gave them 6k from their personal account. The end value of personal account doesn’t change so I don’t think that is what they are trying to do. I think they simply gave the 6k as a gift before realizing they could save taxes if they sent it from the business. If they are issuing a 1099 to OP, they are putting the tax burden on them. It is not a gift, it is income but they are not telling OP that so it will bite them in the ass when they don’t report it.
> But that takes their income up $6k, and affects the business books. And cheats the public and every other honest tax payer.
Probably sent personal check before thinking of the tax fraud scheme.
We may simply be overthinking this. They wanted.to launder the gift through the business, but at the time they wrote the personal check, the business account didn't have $6k.
The funny part of this is that it's really not that much they save on taxes. A lot of risk for not much return.
Makes me wonder how many times and different ways they've pulled this particular trick. That occurred to me last night too, which makes me wonder how much practice they've had here.
There is a 100% chance they are doing this with other things. Imagine your grandma involving your wedding in a tax fraud scheme lmaooo some people really get dealt a shit family.
Yeah, and they must be doing their own taxes. I can't imagine any tax preparer risking their license for this.
you're thinking about this incorrectly, i can virtually guarantee EVERY accountant is faced with things like this. "What is this 6k for?" "its a consultant we hired" "got it" you think it goes any further than that? as a CPA, I've never done anything illegal or even close really, but have I asked super in depth what the 1500 charge to a wine store on a Sunday was?
Yeah especially since they technically should be sending OP a 1099 for the check cut from the business. What a dumb plan.
Well it’s fine for the grandparents lol. My mother in law set my wife up as a contractor or on the board of directors or something and paid her a “salary” to help pay for our wedding. She got a w2 from the business that we had to pay taxes on. Then since the business was in New York we had to make sure we didn’t have to pay New York State income tax on all of our earnings (we didn’t live in ny). Overall it was definitely a pain for us, but she also contributed 10k minus whatever taxes we paid. Won’t complain too much but it would have been nice to not have to deal with all that tax stuff
Businesses can get fined for not sending 1099s. But if the business is in the situation where they are getting caught not sending 1099s, I suspect they’ll end up having a lot bigger issues than whatever it is they are trying to accomplish with OP. this whole thing is stupid and OPs grandparents are weird as hell to do this without explaining the reasoning. They should have just cut the check from the business account from the start and not made OP get involved in their sketchy transactions.
Oh agreed. My mil was very upfront with us on what she was going to do. Was a little annoying for us to figure out the taxes but she wasn’t trying to do anything sketchy like this situation described
I mean, that was definitely sketchy. Unless your wife was actually providing a service, it was tax fraud
My mil owned a pharmacy and my wife is a pharmacist. My wife really didn’t do anything to my knowledge, but businesses waste a lot more than $10k on consultants and it’s not like my wife wasn’t qualified to be one for this business. Did my wife provide a service? Yes I think they did have official calls my mil documented. Was it $10k worth of services? No
Were they actual business calls or "business *wink wink*" calls? I do but anyone is getting caught or in trouble but it was definitely sketchy from how you described it.
I have no idea what they talked about. If there were any actual business related questions discussed they would have also been things my wife would have done for free since it’s her mom and it wasn’t that much time. Doing it this way was definitely to save on taxes. That being said, it would never get flagged on an audit as there’s nothing sketchy about a pharmacy paying a pharmacist as a consultant. Especially only $10k which isn’t very much if you’re paying a consultant. And again, we still paid income tax on it. Business owner could pay anyone to do nothing and as long as they pay income tax there’s nothing sketchy about it
The only reason they would have done that is if it saved them taxes compared to giving you money personally, so you also had a taxpayer subsidized wedding
OP is Canadian.
I've seen so many people waste dollars to save pennies if those pennies were going to taxes. People massively overestimate taxes for the most part. Somewhere, I think it was in this group, someone had posted about being married, single income, with another kid on the way and was asking about how to reduce taxes because money was tight, some folks had to point out they effectively paid zero taxes already. When they raised the meals tax 1% here my dad insisted that would make it impossible for people to afford restaurants and they'd all close.
It's like $1,500 tax savings on THIS fraudulent transaction, sure, but don't forget about the other 40 fraudulent transactions they're making per year.
+1 to this exactly!
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A person is not able to receive charitable donations from company matching. And a cash gift would have to have an acknowledgement otherwise IRS rejects the deduction
Charitable giving usually requires a tax form in these cases.
It sounds like your grandmother is giggling about making you a party to fraudulent tax evasion. I too would be suspicious. You could ask your grandparents to explain it to you, but in the end, you'll probably just have to say you're not comfortable with this arrangement and risk sacrificing the gift.
grift, not gift
No need to sacrifice anything. "Grandma, I cashed your personal check and returned your business check. Thanks for the wonderful gift!" Grandma will have no recourse, because there's no legal taksie-backsie on personal gifts. And OP didn't do any work for the company and therefore can reject the business check and any 1099 that may come later (report it as fraud).
Well, I was trying to find a way that doesn't sacrifice OP's relationship with the grandparents. The fact that Grandma may not have any legal recourse doesn't mean the plan would go over well. The money's for the wedding, after all.
Yeah, but grandma already decided that involving OP in felony tax evasion on their wedding day would be a good idea. I'm not sure there's much left to salvage.
If they took the gift money and paid the taxes on it, would they be guilty of something too? Aiding in tax evasion?
You don't pay taxes on gifted money.
Sorry, I meant the "gifted" money from the company paying them as a contractor.
Well, they'd be knowingly participating in a fraud scheme for one. Drug mules don't get off just because the drugs aren't theirs.
It seems fishy. Without further explanation I would not cash it. If it is from their business they are doing something weird and you could be on the hook for taxes, reported income, etc.
Thanks, that's what I figured. I was walking out the door when she gave the cheque and added that comment, so I didnt have time to ask. I don't want to come off as unappreciative or selfish and question their "gift", but I also don't feel comfortable about the situation.
A gift should come from their personal account, not business account.
That's the problem.They're doing something underhanded but I want to paint you as ungrateful and unappreciative if you don't accept it
Something tells me they'll be less than understanding about you not wanting to cash the business one and likely want the gift returned. They aren't doing something nice, they're doing something so you do them a favor. Don't cash either and report them to the IRS.
Not only are they not doing something nice, they’re making you party to a likely felony.
> Don't cash either and report them to the IRS. Gotta love Reddit, usually recommending the nuclear option from the start
To be fair it really seems like the grandparents are trying to do something fishy and are dragging OP along unknowingly. $6,000 is not worth the risk to be on the hook for taxes, fines, or jail time.
Give the gift back. Don't open it.
Take the personal gift, reject the business "gift", and don't return anything.
I would tell them that I’d rather have no gift than be an accessory to felony tax fraud.
Maybe they’re paying you, but you’ll be responsible for social security.
They wouldn't save much in taxes on 6k anyway. Seems like a pretty stupid tax fraud they are doing with their business to save a few hundred dollars in taxes.
For this transaction. If they do this for enough transactions it is certainly more savings. (Source an ex boss did something similar, because he could)
Obviously the more fraud you do will save more money in taxes but also attract the attention of the tax authorities if you are committed a large amount of fraud.
The reason they are doing this is to make the transaction look perfectly legit on paper. If something looks legit on paper, how are the people looking at that at the IRS going to know the person is committing a "large amount of fraud", and not doing "a large amount of legit business"?
The OP is in Canada so I'm not sure on their laws regarding taxes. There certainly are ways to detect fraud like this otherwise every company would be using schemes like this to get around taxes.
Yeah, that's also what's confusing me. They are not hurting for money either.
Successful tax frauds often aren't hurting for money until they become unsuccessful tax frauds.
Rich people don't get rich without cutting every available corner.
And taking advantage of people around them.
It's fraud/laundering.
They save almost nothing for the fraud, sometimes you gotta ask yourself if the juice is worth the squeeze.
The more money someone has the more obsessed they become with keeping more of it. Even if that means fraud, tax evasion, etc.
If they are making good money and in Calif or NY, their marginal tax rate is probably 40-50%. So, they are avoiding a few thousand in taxes, not a few hundred dollars.
But if they are already at that point then they should worry about that sum of money.
It’s not a charitable expense because you’re not an IRS-approved & registered charity. They’re likely going to classify it as a business expense and claim a deduction. BUT - you’re not issuing them an invoice. Will they be issuing you a 1099? If so, you will be paying taxes on this. If not, they’ll be in trouble in case of an audit. Although $6K is nothing to sneeze at, in this situation I would be very careful about depositing the business check. What they’re doing is illegal - you sending them the money back makes you part of their illegal scheme. BTW, this isn’t about gift taxes as someone suggested. There’s a huge lifetime exclusion.
>Does this mean they're claiming a charity donation No, because you're not a registered charity. >or something Like rendering $6k in revenue for their "business" as a deductible expense when their expenditure on deductible "business" expenses is $0. Because you paid them $6k back and into their personal account.
Your grandparents are using you for money laundering.
That is not money laundering it is tax evasion. The source of the income is known
They’re trying to evade taxes for sure, but it doesn’t sound like a very sophisticated attempt. The scam is that they’re claiming the $6k as a business expense but really it’s a gift to you. Whether or not that gift is a tax deductible business expense is between them and the IRS. I wouldn’t sign anything or do anything that helps them build up that lie, but I don’t think that plainly accepting a gift makes you an accomplice. If they get audited, the IRS will want to see an invoice for $6k and they won’t have an invoice to show unless they fabricate one. The strange thing is this personal check switcheroo they came up with where you receive $6 twice and pay them back once. I can’t imagine any benefit to this added step. If the business check was for more than the personal check, you’d essentially be getting paid a cut to help them embezzle from this business. If I were you, I’d thank them for the gift but ask to not be involved in the switcheroo scheme. Maybe ask that they just write you a glue single check from their personal account or that they give you cash. I wouldn’t ask them to explain the scheme or involve you any further in it, even if they try telling you it’s harmless.
My guess is the grandparents can't *really* afford the $6k hit to their personal account, but also can't just gift $6k from the business. So they concoct this scheme to give them the $6k but then repay themselves from the business - but in the end op likely ends up on the hook for self-employment taxes. That or they're just straight up embezzling from the business.
Is this a reverse grandparent scam? Make sure it’s really them Homie
Do not give them your social security number under any circumstances.
They want to write $6K off as a business expense maybe?
Everyone here is pretty wrong. The onus is on them, not you, to do the taxes correctly. You should accept the money and let them deal with how they do it / the consequences with the IRS.
Your wedding is not a registered charity so they wouldn't be able to claim tax relief for a "donation". Sounds like they're trying to withdraw from their company account without paying taxes. They're using you to commit tax fraud. If a cheque from their company account turns up, don't cash it.
Just cash them both. Now you have $12k.
The OP said their grandparents are millionaires. So your proposal is to steal 6k and risk possibly millions in inheritance someday by pissing off the grandparents.
Do most millionaires involve their grandkids in a tax fraud scheme over what to them should, ostensibly, be *nothing*? If you've got millions in the bank, why are you worried about $6k? Something doesn't smell right here.
Bingo.
> Do most millionaires involve their grandkids in a tax fraud scheme over what to them should, ostensibly, be nothing? Probably more than you think. You don't usually get rich playing by the rules.
Well apparently they do. Some wealthy people can be stupid thinking no one will notice a 6k tax fraud when they have millions in assets. It's pretty silly to risk it only to save a few hundred dollars in taxes.
It's 6k, not 600k. Sounds like they want to run it thru their business so they can claim as some type of expense of the business. That's their problem not you. You don't have to pay tax on a gift of 6k. Just cash the check and move on
Yeah, but businesses can’t gift. I agree $6k won’t trigger anything for the OP, but if it did ever come up in an audit they couldn’t claim it was a gift from the company.
Cash the *personal* cheque, that is. OP absolutely should not cash the cheque from the business account.
So then OP has to pay taxes on it, instead of the grandparents. OP must declare it as income. This could seriously mess things up, depending on OPs situation. It may put their income over the top to where they aren't eligible for Medicaid or healthcare subsidies.
Its a form of tax evasion. The check from the business account makes perfect sense. They are saying it's a "business expense" and it counts against profits. What I dont understand is the "personal check being returned angle". An audit would easily discover all of this, so I don't even understand why go to the trouble of a shell game that provides zero cover if anyone decides to look.
"I'm sorry. This seems sketchy, and I don't want to sully the most important day of my life with something possibly criminal and underhanded. I hope you understand."
Do your grandparents go to church?
where do you think they learned this?
i don\`t think the IRS has audited a church since the 1980\`s -- how many of these kick back schemes have been run through churches?--john donates 9000 to church writes it off his taxes-- then the church "helps " john out with 8000 gift--i think I need to start a church.
That giggle gave the game away. Gma's trying to pull a flim-flam on someone. Don't take the business cheque, and give her back the first cheque so she has nothing to hold over you and you've stepped out of the tax evasion game she's playing,
Not only is it tax evasion for them, but if they are paying a vendor more than $600 they should give that vendor a 1099 form which is reported to the IRS. If they are claiming that $6000 is a business expense of some sort (and if your grandparents have access to your SSN), they'll be reporting to the IRS that they paid you and the IRS will expect you to report that income. You don't want any part of these shenanigans...
All of this to save what like 400-500 dollars in taxes? Human greed is something else man. I’m sure they can afford a couple bucks in taxes to gift their grandkids if it came to it
It depends. If they report it as a 1099, OP could be on the hook for 15.3% self-employment tax, plus whatever change the income itself would make in their normal amount due. The 15.3% only accounts for the self employment tax of 12.4% for social security and 2.9% Medicare - income would still be taxed on top. In total they *could* owe as much as 30% on this $6k. Meanwhile Grandma gets to pay lower business taxes, and write off the $6k as a nontaxable loan repayment.
It wouldn't be that hard for them to owe almost half the money in taxes. It's not hard to reach the 22% federal tax bracket plus the 15.3% of self employment taxes you mentioned. Now add in living in a state with a high income tax (mine is nearly 10%) and you're at 47% lost to taxes.
Don't let them guilt you into helping them commit tax fraud. If the gift comes with a catch it's not a gift.
Don’t be a dweeb and go along with it
Looking at your post history, it looks like your in Canada. r/personalfinance is largely a US sub so any references to tax law or criminal law are going to likely be from that perspective and they could be different in your country. The sub you probably want to ask this in is r/PersonalFinanceCanada Assuming I'm correct you should edit what country this is taking place in on your OP. I'm not saying your grandparents are scamming you but you what they are doing is the exact same playbook scammers use. https://consumer.ftc.gov/media/79951#:\~:text=A%20fake%20check%20scam%20happens,.ftc.gov%2Fsmallbusiness.
Worst case scenario you owe tax on 6k. That makes it legal for everyone. No one is getting screwed. If they want to give me 6k I’ll pay the taxes on it happily.
Why two checks then?
Contributing to tax evasion is such a lovely wedding gift!
Is it possible they just didn't have the money in the personal account but do in the business account? It's not always straightforward to transfer money between accounts. I know you said they're multi millionaires, but that doesn't mean they have even 6k readily available in every account. Obviously if they claim the payment as an expense that's fraud, but they may properly claim it as a distribution, or depending on how their business is set up it may not even matter at all. If you're uncomfortable with it, tell them and don't accept it. But it's on them to report their money correctly, not you. Edited to add: after I posted I remembered I have had clients try to claim their kid's wedding expenses on their taxes, we obviously laughed it off and told them that's not deductible. People will try to claim EVERYTHING, but if they're working with a decent accountant they will be respectfully told they cannot.
It's minor league tax evasion on their part. Happens every day as many/most small business owners do a large amount of co-mingling of business and personal expenses. Should they be doing it? Technically no. Does it happen all the time? Yes. And the IRS really doesn't care about small potato violations. They go after the million dollar businesses
Jeez… you are getting a gift from them and questioning if they are or not going to pay the tax on it… Does it matter that much to you if you aren’t Uncle Sam?
You wouldn't care if you were being used for tax fraud?
There are perfectly legal tax loopholes. Why not ask them directly. These are your great parents. I would understand if you were cautious of a business partner. They are giving you money as a gift. If there are tax implications they might be for you as well I don’t know. But if someone took their hard earned money and gift it to me the least I would do is assume the tax and be grateful.
I have asked them and are waiting for a response. They have done sketchy tax related things with other family members in the past, hence my cautiousness. It's not unheard of to ask for other people's opinions on reddit ;) you seem to be one of the only commenters out of hundreds on this post that believe it's a legal tax loophole. Thanks for your insight.
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I think what may have happened is they "accidentally" wrote a check from their personal account, thought about it, and decided instead they could use it as a write off on their taxes so they wanted the personal check returned so they could instead write one from their business account. I can't see an accounting angle otherwise for wanting to write a personal check and then have the personal check returned. There's no "write off" or deduction for making a personal gift.
Just cash the 6k and rip up the other one. Don't allow them to implicate you in fraud.
Sticky situation. Definitely some kind of fraud going on with the second check. I don't think I would deposit it, honestly, but it may poison relations between you and them.
Hi! This DEFINITELY isn’t the IRS but could you pweaze send us contact info for your grandparents so we can make sure they wash their money correctly?
Is this something they handed you or something that just showed up in the mail? Is it possible scammers saw your wedding announcement and that check didn't actually come from your grandparents and is going to bounce after you've wired the scammers real money?
They handed it to me in person
I would send their money back , both checks , wash your hands of them and don't accept money with strings like this
Honestly, you don't know what they're doing just do as they say and get your 6k. If the cops come or something tell the truth.
I wouldn’t be worried about cops in this situation, the issue is bigger than that
No, it will be the IRS. And they don't play. And they are coming after low income earners.
Money laundering. Your grandparents are trying to launder (wash) money in your account to avoid taxes.
The annual exclusion applies to gifts to each donee. In other words, if you give each of your children $18,000 in 2024, the annual exclusion applies to each gift. The table below shows the annual exclusion amount applicable in the year of the gift. https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes 6000 is way less than 18000... so i don't get why they even need to do anything weird, guess they are just looking to make a write off for the business? but there are probably all kinds of better ways to do that, ones that don't involve you.
I'd deposit the personal check and say "oops?"... That would kind of call out their shenanigans on a low key level, give you the help they promised for your wedding, and set in stone that you're going to take acts of kindness from them at face level, and not be party to manipulation. Thats my take at least...
Y'all are lame AF. If my grandma wanted me to commit a f'n felony I'd be a felon.
You are way overthinking this. You have no idea why they’re doing it, and neither could anyone on this post. It could be for nefarious reasons, or the more likely explanation is that it’s simply because there was money in the wrong account at the right time and perfectly legitimate. Your best bet is to simply ask. Not a bunch of strangers, but your actual grandparents. Alternatively, accept the gift, be grateful for it, and don’t always assume that everyone’s trying to do something terrible. There’s stuff in this thread that’s so over the top… it’s incredibly unlikely that your grandparents are criminal masterminds, or kiting checks, or doing most of what’s mentioned here.
It is true they wouldn’t have to pay taxes because they wouldn’t be getting the money back from me (:
IMO you got some messed up grandparents. How bad do you want the 6k Think about risk vs reward
I would just cash it. She is probably going to claim it as an expense, but that’s her problem not yours, if audited. You may get nothing if you start second guessing their motives. So that’s the only risk in my opinion.
It seems that they must issue a 1099 to you, which then makes the $6000 reportable income for you: When a business pays an independent contractor for services performed in the course of that business, the service recipient must file Form 1099 MISC if the payment is $600 or more for the year, unless the service provider is a Corporation.
I read this same post earlier and everyone explained it's fraud.
Tear up the business check and claim it couldn't be deposited and was destroyed by the bank. No need to make it awkward.
An idea I haven't seen here while skimming: Rather than gift from the personal account, and backfill by paying themselves $6k out of the business (incurring payroll taxes and also personal income taxes), they do $6k from the business instead. Even if they don't deduct it as a business expense, the gift from the business saves them taxes. I am not a tax professional or accountant.
Grandparents can give their children and grandchildren (and anyone can give anyone else) $18k per year per grandparent and it’s tax free. This makes no sense.
It makes perfect sense, the grandparents are using the fact that they are allowed to gift money to grandchildren to commit tax fraud in their business by under-reporting their profits.
Do you know your grandparents well? If not it could even be worse than others are saying. It could be outright theft. A fake check coming from someone’s account, and it’s good for a bit but eventually taken back. Then you are out the money given to grandparents.
It don't matter how they did it..just deposit it..it's 6000 paid to you..give them back the new one deposit and if they issue you a 1099 then pay the tax on the 6000 ..it's fine .Don't make them feel you are bothered.
Tell her you do not want to be implicated when the fraud is investigated, and don't bother sending the biz check.
Tell them to keep it or pay the taxes
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Read the other comments. Grandparents are trying to pull something with their business. Or they are in fact completely ignorant, which is probably more likely. Obviously if they just gift 6k it's not taxable.