Q&A: I am submitting my tax return (late). Must I report income from my parents (my only income)? If so, how?

Question by Semper: I am submitting my tax return (late). Must I report income from my parents (my only income)? If so, how?
I am not working, as I am back in school and my only income is help from my parents. I am too old to be a dependent. I am not sure how to report that income, since the only place I see to report it on the return asks for an employer ID — but reporting no income seems wrong, so…. ?

Best answer:

Answer by acmeraven
I am a parent with six daughters and have done tax returns since 1971. When kids get the long green from mom or dad it is usually under the gift exemption status. If you got less than 11,000.00 from each parent there is nothing to report, declare, yaddah. Stay in school and get a good job so you can support them when they get old and social security goes belly up.

What do you think? Answer below!

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5 thoughts on “Q&A: I am submitting my tax return (late). Must I report income from my parents (my only income)? If so, how?”

  1. Wouldn’t you treat any funds your parents give you as a gift? You have no income yourself. So no need to report what your parents Gave you.

  2. If you did work for your parents, maybe remodeled their house or something, and they paid you to do it, then technically and legally it would be reported as self-employment income. If they’re just helping you out so you can go to school, then you don’t report it.

    You’re never too old to be a dependent relative if you meet the criteria. If you make under $ 3300 a year (2006 number – 2007 will be a little higher) and your parents provide over half of your support, then they can probably claim you no matter how old you are. Age 24 is the limit to be claimed as a dependent CHILD.

  3. There is a long answer and a short answer but judging from your concerns, a long answer would be appropriate.

    Whether you need to pay taxes on the financial support (not income) which you receive from your parents would depend on whether did your parents claim any tax relief (or tax deduction) for the amounts paid to you. If they had already paid taxes on the funds which you received, i.e. they did not claim any tax deduction or the funds came from their savings, then there is no need for you to pay any further taxes on such funds. Since you are too old to be a dependent, your parents would be unable to claim any tax deduction for the financial support provided to you, unless such payments are declared as wages paid for services rendered by you, so it is obvious that they have already paid taxes on those funds given to you, whether they came from your parents’ income or from their savings, and you have no need to pay any further taxes.

    If desired, one way for your parents to claim tax deductions for such payments made is to set up a home-based business and hire you to perform specific services for the said business. In such instance, the payments you received from them would not be considered as financial support but should rightly be treated as income earned by you, so that you can report it as such and then pay taxes for such income.

    My advice is to make life simple for yourself and for your parents by treating their financial support for your studies exactly as you have described, viz. “help from your parents”, rather than being hung up on trying to pay income taxes. As the Lord said, “give to Caesar what belongs to Caesar and give to God what belongs to God”. In other words, you don’t need to pay taxes if you don’t have to do so.

    It is perfectly lawful to AVOID taxes but it is unlawful to EVADE taxes. All of us have a moral duty to Avoid taxes because we need to support our families and other personal commitments but it is absolutely wrong to Evade taxes, as we have a legal obligation to pay taxes, for the community services provided by the government. You’re NOT evading taxes if you’re NOT earning any income (unless you’ve received unearned income, from interest on savings, investment profits, etc), so there is no need for you to report any income for the financial support or help received from your parents.

    My personal recommendation would be to treat all payments received from your parents as a interest-free personal loan (or with a token interest, not higher than interest on savings from a bank), so that you can repay them from the future income you would be earning after you finish your studies, which you may then pay taxes on your future income, depending on how you structure the terms of the personal loan. I believe loan repayments for college education education are tax-deductible but you need to consult an accountant, to be sure.

    Please feel free to contact me for clarification, if my comments are unclear.

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