Is there a legal way

[Jerry1]

A third party cannot contribute directly to your Vanguard charitable account. It would have to pass through you and thus be income that would show up on your W2 or 1099.

I was thinking that the company would just write a check directly to the charity. They’d have to be willing to do it and the agreement would basically be a handshake but it would get money to a favorite charity without incurring income.

 

[gauss]

What are you talking about? I put cash in the bank all the time, and anything in the bank can be invested in the market or wherever. Unless you're talking about 10s of thousands of dollars at a time, it's no big deal.

I do agree about SS, though. That's why I would never work in the cash economy. Well, I would never work anywhere anymore, but I think it's important for young people to report income and pay into SS. They may not think it's important now, but someday they'll wish they had it.

I suspect the post was referring to self-employed people who are paid in cash and fraudulently do not report income, have to conduct a very measured life in terms of not engaging in any financial transactions with companies who are required to report income under your SSN to the IRS.

IF IRS sees income coming to you under your SSN but you never worked, they can legitimately ask you to document the source of the income that funded those transactions. Very few types of income is exempt from income taxes.

 

[youbet]

I was thinking that the company would just write a check directly to the charity. They’d have to be willing to do it and the agreement would basically be a handshake but it would get money to a favorite charity without incurring income.

Well........ technically you'd be stretching the meaning of "legal" since the company would not do this unless you were working for them and I'm sure the IRS would consider the charitable donation the company made to be income to you. I don't think you or the company would ever get caught and I'm not saying I wouldn't do it. I'm just saying it kinda drifts outside of "legal" since you'd have to omit telling the IRS about it.

Also, the company wouldn't be paying FICA tax or Workman's Comp, a no-no. They'd get their hand slapped if the arrangement were brought to the light of day. If they're a legitimate company with something to lose if they get involved in an IRS or Workman's Comp issue, I wouldn't do it if I were them. If you were killed or hurt on the job, for example, it could all blow up.

When you threw in the word "legal," you made this much more challenging. Perhaps you'd settle for "illegal but unlikely to get caught?"

 

[jazz4cash]

^ that is a great idea I would be able to put all in to 401K because total income for the 4 to 5 mounts is about $12000.

The question I have if I took SS would this effect SS if I put all earnings into a 401K at the present time. I know when I started taking it out then it would be considered income then taxes would be a part of SS bottom line.

I think I mentioned this in my first post. You can contribute to 401k or IRA up to the limit. Taxable income is reduced by these contributions but FICA tax for SS is calculated on your gross pay so your SS benefit is not affected. Does the PT employer have 401k?

 

[pb4uski]

I was wondering if there is a legal way to get paid or compensated for work but not get a pay check?

I'm looking down the road and enjoy a summer job that is very flexible but the income I make doesn't do me any favors.

Is there a legal way a company can do to compensate for pay? Like a food voucher etc. that I wouldn't have to claim as income?

Thanks

I take your OP to mean that you want to work and earn income but not pay taxes. You could work that flexible summer job, do 100% contributions to a 401k if the firm offers one (or deductible IRA if you qualify) so your income would be nil... then live off savings or existing income that you are receiving... you'll just be deferring the tax until later.

On the other angle... if an employer pays your personal expenses then it is income to you.

 

[Ready]

The company that I've been working for for the last 16 years put out a policy statement 3 or 4 years ago I think making it real clear that any rewards had to be experiential. So you could give, as a reward, a gift certificate to go out to dinner at a particular restaurant but you couldn't give them an American Express gift card for that amount of money.

I would be very curious to see what section of the IRS code they are relying on to determine that a gift card to an "experience" is not taxable income.

 

[pb4uski]

+1 IME both would be taxable income.

 

[street]

jazz4cash and pb4uski and everyone thanks for the direction and options. I know they have a 401K and a couple years ago I opted not to take part in it because it was PT and not a lot of money involved.

I will talk them to see if I can start contributing my entire pay check to the 401K the offer. My wages for the for the year amount to about $12000 so I should be able to fall under the max amount that I can contribute to a 401K. The amount I can do for an IRA would be $6500.

So if I do this it would effect my income for ACA.

 

[pb4uski]

.... So if I do this it would effect my income for ACA.

You mean "not" affect your income for ACA, right?

 

[street]

^ Yes pb4uski "not" to affect my income. Thanks for paying attention to details. LOL

I just looked they offer tax sheltered annuities. I know how many feel about them and I'm not a fan of them either. If I can enter and contribute to one of them I might consider it because I don't need the money and it would be something I could stretch out in payments down the road.

Do a tax shelter annuity would be classified as income right?

 

[bUU]

I would be very curious to see what section of the IRS code they are relying on to determine that a gift card to an "experience" is not taxable income.

Section 1.132-6(e) of the U.S. Department of the Treasury’s regulations which discusses de minimis fringe benefits, and makes clear that cash and cash equivalents are never de minimis fringe benefits while occasional dinners for two can be.

 

[pb4uski]

Ok, I'll bite... where does it state that occasional dinner for 2 can be... it refers to occasional group meals under the exclusions...

Examples of Excludable De Minimis Fringe Benefits: Reg. §1.132-6(e)(1)
Occasional (infrequent) not routine:
Personal use of photocopier (with restrictions)
Group meals, employee picnics
Theater or sporting event tickets
Coffee, doughnuts, and/or soft drinks
Flowers, fruit for special circumstances
Local telephone calls
Traditional birthday or holiday gifts (not cash)
with a low FMV
*“Restricted” gift certificates limited to specific non-cash
items, e.g. holiday turkey, coffee drinks
Commuting use of employer's car if no more Reg. §1.132-6(d)(3)
than once per month

 

[Sunset]

^ Yes pb4uski "not" to affect my income. Thanks for paying attention to details. LOL

I just looked they offer tax sheltered annuities. I know how many feel about them and I'm not a fan of them either. If I can enter and contribute to one of them I might consider it because I don't need the money and it would be something I could stretch out in payments down the road.

Do a tax shelter annuity would be classified as income right?

You would be better off putting your earnings into a 401K and IRA (to avoid taxes since this is what you want to do) , and later use the money in the IRA (and even roll 401K to an IRA) and buy an annuity at that time.

The money grows tax sheltered in the 401K and IRA and you end up buying an annuity (or not) when interest rates are higher and have choice, rather than locking yourself into some lousy choice company tax sheltered annuities.

 

[bUU]

Ok, I'll bite... where does it state that occasional dinner for 2 can be... it refers to occasional group meals under the exclusions...

Never mistake a list of *examples* as the comprehensive list of all possible applicability.

Consult your own lawyer for further assistance.

 

[street]

You would be better off putting your earnings into a 401K and IRA (to avoid taxes since this is what you want to do) , and later use the money in the IRA (and even roll 401K to an IRA) and buy an annuity at that time.

The money grows tax sheltered in the 401K and IRA and you end up buying an annuity (or not) when interest rates are higher and have choice, rather than locking yourself into some lousy choice company tax sheltered annuities.

Oh most defiantly a 401K/IRA is better. Now it looks like these Tax Sheltered Annuity's are the tool they may offer. I assumed that a Tax Sheltered Annuity is tax deferred money but I would need to pay SS/Medicare taxes but it would show that I had no income for the year.

Now if I'm wrong on the way Tax Sheltered Annuity work someone please set me straight.

Thanks

 

[pb4uski]

^ Yes pb4uski "not" to affect my income. Thanks for paying attention to details. LOL

I just looked they offer tax sheltered annuities. I know how many feel about them and I'm not a fan of them either. If I can enter and contribute to one of them I might consider it because I don't need the money and it would be something I could stretch out in payments down the road.

Do a tax shelter annuity would be classified as income right?

From what you wrote, it sounds like their tax-deferred option is like a 401k but that the investment option is a deferred annuity? In that case, what you might consider is a combination of maximum deductible IRA contributions ($6,500 for 50 or older) and 401k.. that way you could maximize tax-deferred savings that you can control and minimize the amount going into the deferred annuity.

So for example, if you are over 50 and earn $12,000 a year, defer $5,500 into their 401k and your net pay will be $6,500... make a deductible IRA contribution for $6,500 and your AGI will be zero.

 

[street]

From what you wrote, it sounds like their tax-deferred option is like a 401k but that the investment option is a deferred annuity? In that case, what you might consider is a combination of maximum deductible IRA contributions ($6,500 for 50 or older) and 401k.. that way you could maximize tax-deferred savings that you can control and minimize the amount going into the deferred annuity.

So for example, if you are over 50 and earn $12,000 a year, defer $5,500 into their 401k and your net pay will be $6,500... make a deductible IRA contribution for $6,500 and your AGI will be zero.

Thanks again for your guidance. Your example is what I'm after I don't want to claim any income.

I will check with them and see actually what they offer. I do know that they offer a retirement type program because I had to sign something a few years back and I opted out of it. I'm 60 and I would like to contribute everything I make to the retirement fund to defer taxes and show NO income. I also want it to be legal and legit.

 

[Closet_Gamer]

No clue as to the company structure, but perhaps they could pay you in non-executive stock options or restricted stock units with a future vesting date?

So long as you don’t have “constructive use” of the money and are willing to absorb the risk, I believe that could allow you to defer taxes until the rsu’s vest or the options vest and you exercise them.

Obviously, get legit tax guidance from a pro before you do this.

 

[sengsational]

LLC Draws

This might not be applicable for the OP, but I was wondering (wondering enough to type this but not enough to google it), could you have an LLC and simply not take a salary?

You work, the revenue gets deposited and the expenses get paid, but instead of paying yourself a salary, you simply leave it in the bank, or invest it. Then, later, when controlling AGI is not as much of a problem, you start giving yourself a salary.

 

[pb4uski]

I don't think so... to my knowledge LLCs are pass-throughs... essentially like a Schedule C.

 

[Sunset]

OP would need to form a corporation to hold the income, but the big problem would be that it would end up being double taxed (mostly) , and it's a huge headache. Could be worth it if we were talking huge sums of money, but not for the tiny 12K income.

 

[street]

I checked with the company I work for on a temporary/part time for a few months each summer. They checked and I'm not eligible for any of their retirement programs.

So will have to rethink this gig and what I should do.

 

[Sunset]

I checked with the company I work for on a temporary/part time for a few months each summer. They checked and I'm not eligible for any of their retirement programs.

So will have to rethink this gig and what I should do.

You can still contribute to a regular IRA , limits are dependent upon age, but probably at least $6K worth.

 

[street]

I want it to be a tax deferred account. I suppose the company could send it to a financial institution. Of course they would not be able to take taxes out of the money. SS and Medicare tax may come out but not federal/state so it would not be considered income for that year.

 

[pb4uski]

If you earned $12k and made a $6,500 tIRA contribution then your income would be $5,500. If that is too much, then limit your hours and earnings to $6,500 so your income will be zero.