Donations received and taxes

[ilovedolphins]

I want to set up a donation website for my niece who has a baby with a rare condition.  I want the money to come to me and then I will pay taxes on it and then gift it to her.  Does that sound legal or doable?  I don't want her to have one more thing to worry about.

[Deleted]

Why would you pay taxes on it? 

[ilovedolphins]

Because I thought donations were considered as income.

[Deleted]

I would think it would be more like people are gifting her money. It's not like she will have a nonprofit? Right? 

[ilovedolphins]

Yes, that is the way I saw it.  But if I have them send me the money would it make a difference?

[Deleted]

If the check is written to you, it might look like a gift to you, and then if you wrote a large check to her, and it was over 13k, then you might have to file a gift return, as you would look like you were gifting to her. 

I don't see that you wold owe taxes, but might have to file the return if its a lot. 

Thats how I see it amyway. Anyone else? 

[eapat]

As long as the check is made out to your neice there would be no tax implications for her. If the check is made out to you and you use the money to directly pay for medical expenses for someone else (you have to make payment directly to the medical provider, you can not give the money to your neice and then she use it to pay the medical bills) there would not be any gift tax issues. The gift tax exlusion amount is $14,000 for 2013.  If you make a gift greater than that amount to any one person you have to file a gift tax return, but chances are you would not owe any tax.  Any amount over $14,000 would be deducted from your life time exclustion amount (for 2013 the amount is $5,250,000).

[ilovedolphins]

I was going to have them deposit donations into my Paypal account and then give my niece the money.

[Deleted]

How are you planning on marketing to people to solicit donations?  Are you asking just family, or are you looking for crowd funding?

Give Forward (fundraising site for medical issues) has a good guide on what it takes to run an effective fundraising campaign. I think this is valuable reading & will give you a good idea of what is required to successfully raise funds.

Why do you think it will be impossible for niece to write checks on medical bills?  Your biggest role could be in organizing the fundraisers, doing the weekly communications & stuff like that.  You can designate the fundraising account as Family of niece's child.

 

[mwcpa]

"I want to set up a donation website for my niece who has a baby with a rare condition"

Why not find a local charity that can help you with this?

" I want the money to come to me and then I will pay taxes on it and then gift it to her"

If people "gift" you money it is not income and not subject to income tax.

"Does that sound legal or doable"

It is, but, given the day and age we live in I would not expect that many (other than close friends and family) would give you money and trust that it would all go to the child.  People are generally cynical these days.... ever gotten one of those emails from the long lost cousin who happens to be the future king of some unknown country.... or the email (or text message) from a friend who got robbed in a foreign country and they need money to buy a new plane ticket....

"If the check is written to you, it might look like a gift to you, and then if you wrote a large check to her, and it was over 13k, then you might have to file a gift return, as you would look like you were gifting to her."


Why not work with the hospital or the medical provider to have "donors" pay the doctor and or his/her team directly?
Why not find a local charity that can take up the cause so the "donors" could obtain a tax break (since you are posting here).  Donations they give you do not result in a tax break for them.

[TheOtherMe]

Excellent advice, mwcpa.  I don't donate to those kinds of fundraisers unless it is through a charity.  I've made one exception where I knew the funds were paying medical bills and the child of a dear friend was going to die without a bone marrow transfusion.  She has already buried one child and I could not let her lose another one without trying to help.  9 months later and her daughter is still cancer free.

[happyscooter]

In our area there is usually an account set up at a bank where people can make deposits.  One of the banks officers is the trustee, only the person it is intended for can get the money.  I don't think there are stipulations as to how many times they can make a withdrawal or what the money has to be used for.  But this is a small town and I don't donate unless I know the people and the situation.  I would give them the money outright if I knew how/when/where to get in touch with them. 

[mwcpa]

happy... as this is a posting the tax area it should be noted that the gift you would make does not qualify as a charitable contribution for tax purposes. 

[happyscooter]

mwcpa, I would not want to get a tax receipt, it would only be for $20-25.  But if someone needed gas money or grocery money or money for a co-pay, my amount would come in handy.

[mwcpa]

"But if someone needed gas money or grocery money or money for a co-pay, my amount would come in handy."

That would result in good karma.... I just want to make sure people are aware of the rules for tax purposes...

If I was to give the homeless guy a sandwich (been known to do that, I do not trust them with cash.... if you are opn the street and tell me you are hunger I will get you a sandwich... I am amazed at those who refuse the offer to get food when they claim they need a quarter for food) there is no tax break.... but if I gave the 501(c)(3) soup kitchen a check it more than likely would be.....