Receiving a Cash Gift from a Company

[BlazingFire99]

Hello! I recently graduated college and as a gift, my grandfather wants to help pay for rent for the next year. He wants to gift me 1k every month for the next year. However, there is a twist.

My grandfather is the owner of our family's business, and he would like to pay me FROM the business, not personally. I am not currently an employee of the company, but I have been before. I currently have another job full-time and have not worked at that business for over 2 years.

If he were to follow through with this plan - 1k a month from the business to me, a non-employee - what are the tax obligations here? Would I have to fill out a W-9 and pay income tax on this "gift" if he chose to pay this way?

I fear it does not fall under typical gift tax rules where there would be no obligation as the gift is under 16k (and split in half by calendar year) and I believe if I were an employee of the company it would be straightforward - income tax obligation for me. But I don't quite know what the intricacies are as it is coming from a company to a non-employee. I have a feeling my above answer is correct and would obviously prefer not to do that, but I want to know what I'm talking about before I talk about it with him.

[VolvoGirl]

Well ask him if he's putting you on payroll and will give you a W2 or a 1099NEC.   But if not and it is a straight gift it shouldn't affect your taxes or tax return.  Is he taking a business expense for it?

[BlazingFire99]

It is supposed to be a straight gift - not compensation for work and not wanting me to be an employee. My question is - can you give straight gifts (untaxed under the exclusion limit) from a company? Or will I have to file a W-9 and get a 1099-MISC from him?

I am assuming he wouldn't be taking a business expense for it.

[Critter-3 · Accepted solution]

Your grandfather should not mix personal and business in the same business account.   If he wants to give you a personal gift then he really needs to move the money into a personal bank account and pay you from that personal account.  Just paying it from the business account  is a  lazy practice since it is not a business deduction  and could hurt him in an audit if it is not listed properly as a owner draw.  

[rjs]

I can think of two possible reasons that your grandfather might want to make a gift to you from his business.

1. He wants to claim it as a business expense. That's illegal. You said you assume he would not do this. Do you have any basis for that assumption? If he would not claim it as a business expense, why does he want to pay it from the business?

2. Another, less likely, possibility is that he has made gifts over his lifetime totaling more than $12 million, so that he would have to pay gift tax if he made a personal gift. He wants to make the gift from his business to evade the gift tax. That's also illegal.

The only proper way to do it is what Critter-3 said.

Before your grandfather makes any payments to you, he should consult the accountant or tax professional that he uses for his business.

[Mike9241]

it's just an extremely bad idea for him to make monthly gifts to you from the business account. even if he doesn't deduct the payments, they would look mighty suspicious if the business was audited. it could appear to the auditor that he's paying you compensation because of the regularity of the payments. he's just not paying the payroll taxes and not reporting it. this could present you with tax problems.  if he asks you to fill out a W-9 then he's treating them as a business expense and you should expect a 1099. that too is likely wrong - as an employee, you should get a w-2. 

[BlazingFire99]

Thanks to everyone for the answers. It seemed really sketchy to me which is why I really wanted to get some answers before I got myself in a sticky situation here. Appreciate the advice all around.

[AquaJen]

I don't know why everyone is calling this illegal and not giving you the correct answer.

The IRS allows a business to gift someone up to $19,000 per calendar year without tax implications, as of 2025.  After the amount exceeds $19,000 you would fill out a 709 form and send it to the IRS when you file your regular taxes.  This is NOT illegal, and you do not have to be an employee of the business to receive the gift.  

For more information on the gift tax, you can go directly to the IRS website at Frequently asked questions on gift taxes | Internal Revenue Service 

Remember though it's always best to consult an accountant.  You should be able to find one to give you a free consultation. 

[Mike9241]

@AquaJen 

irs pub 463

Gifts
If you give gifts in the course of your trade or business,
you may be able to deduct all or part of the cost. This
chapter explains the limits and rules for deducting the
costs of gifts.
Chapter 3 Gifts
17
$25 limit. You can deduct no more than $25 for business
gifts you give directly or indirectly to each person during
your tax year. A gift to a company that is intended for the
eventual personal use or benefit of a particular person or a
limited class of people will be considered an indirect gift to
that particular person or to the individuals within that class
of people who receive the gift.
If you give a gift to a member of a customer’s family, the
gift is generally considered to be an indirect gift to the cus
tomer. This rule doesn’t apply if you have a bona fide, in
dependent business connection with that family member
and the gift isn’t intended for the customer’s eventual use.
If you and your spouse both give gifts, both of you are
treated as one taxpayer. It doesn’t matter whether you
have separate businesses, are separately employed, or
whether each of you has an independent connection with
the recipient. If a partnership gives gifts, the partnership
and the partners are treated as one taxpayer.

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Exceptions. The following items aren’t considered gifts
for purposes of the $25 limit.
1. An item that costs $4 or less and:
a. Has your name clearly and permanently imprinted
on the gift, and
b. Is one of a number of identical items you widely
distribute. Examples include pens, desk sets, and
plastic bags and cases.
2. Signs, display racks, or other promotional material to
be used on the business premises of the recipient

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you are probably thinking about the rules for gifts between individuals

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the business gift rule limit hasn't changed for decades

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