Wednesday, December 17, 2008

Can Ya Believe This?

I need advice. Our accountant is on vacation and we are in a crisis!

I am going to try and explain this the best way I know how.

Hubby's companies accountant told him that instant of gifting the truck to us, they are adding it as income. It will show as extra income on our taxes, to the tune of roughly $30,000.00!!!!!!!!!

Then they will cut us a check for their part of the taxes and then we will pay them.

Does this sound legit to you? I know nothing of this type of thing, so we need help.

NOW, a friend of hubby's told him instead of doing the above...........

have his comapny make him a bill of sale and sale him the truck for $1.00.

Is that legit?



Leahann a.k.a Kimberly's Mommy said...

I know that if he takes the truck as a prize then you will have to add the value of the truck to your tax return as income and pay the taxes on it.

As far as what his company is wanting to do I don't know if that is legit or not.

If he has them write him a bill of sale for $1 then you technically bought the truck and would only have to pay sales tax to the state on it. Every state is different though some will allow you to only pay the taxes on the $1 and some will still make you pay the taxes on the blue book value of the truck.

You really need to call another accountant if yours is out. They should be able to answer your questions on it.

Julie @ blessedwithfive said...

Hi Marva, the $1.00 suggestion is not legal. The vehicle is something that was won by your husband and I am sure that your accountant will advise you to simply pay taxes on your winnings (the value of the truck.) I don't believe the company your husband is working for is handling the situation correctly either - I would not do anything until you spoke to your accountant.

The company's accountant should send you a 1099 form for the truck you won and then you will claim the truck as other income - at least that is how I believe it works.

From the Internal Revenue Service Internet site -

Prizes and awards

Subject to certain exceptions, the cash value of prizes or awards won in a drawing, quiz show program, beauty contest, or other event, must be included on the tax return as taxable income.

Taxpayers must also report the fair market value of merchandise or products won as a prize or award, as taxable income.

For example, both a $500 cash prize and the fair market value of a new range won in a baking contest must be reported as other income on Form 1040, Line 21.

I hope this helps you.

mom2twins04 said...

I know the $1.00 thing is no longer allowed in most states and Federally... You have to claim it for the selling or going price... and you have to pay taxes for that amount. Last year My hubby bought a truck at an auction (it was reposessed and they were just trying to get some money out of it)... anyway he bought it for about $9000.00 less than it booked for and the state of ILLIONOIS fought us for the difference in taxes... We had to prove to them what he paid for it... they were trying to make us pay the difference between the bill of sale price and the Kelly blue book price... we had to get a lawyer to sign off on what we actually paid for it at auction... We had to show lots of paperwork... they ended up settling somewhere in the middle... we didn't have to pay the difference in the taxes as we had already paid the taxes on the sale price... but it was under $20,000 other wise we would have had to pay the difference as well as the sale price taxes... Does that make sense?
Good luck with it all... I know it is still such a blessing... especially with all the running you guys do in the summer with the farm and all... I also know that it is a big chunk right up front.... but God has given it to you for a reason... God has shown me that even though we were a lot worse off than what we were used to... he is still in control... he showed me that through you... you were willing to help me while I was emotionally and finacially a train wreck. You guys were not doing great either, but yet you were selfless and not selfish... you sent me things that you could have easily used for yourself and probably would need at sometime too... yet.. you gave willingly.... you were an open and humble vessel that God used and it came back one hundred fold to you... Thank you for listening to God and your gut...
I was worried over toothpaste, toilet paper, and deodorant and yet God provided those worries... maybe not needs at that time, but that was still what I worried about... Thank you for listening to God... I have learned so much from both you and him... he does still work... I have a peace that everything will be ok... it is different than what we were used to.. but you know I am so much more aware of what and how I spend... I had been praying to be better stewards of our money... guess what? I am a better steward...