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.