Possible Tax Implications of "Free" Vista and Office Offer

  • Thread starter Thread starter dirty old man
  • Start date Start date
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dirty old man

? Copied from: http://channel9.msdn.com/ShowPost.aspx?PostID=270923
twentw wrote:
------------------------------------------------------------------
?Has anyone actually asked an accountant for an opinion on the taxability of this
offer? Microsoft clearly labeled these as "gifts" and gifts are not taxable to the recipient.




I have. Everything I have read and heard corroborates that this is the proper way to handle
the situation. Although this is a "gift", it is still taxable. If corporations could give "gifts"
tax-free... well, there would be a lot (more) tax evasion.

The IRS only requires gifts to be reported at the $600 level, however, technically, you're
supposed to recognize the gift as income on your taxes, no matter the amount. It will effectively
increase your AGI (adjusted gross income). You can look up the current tax table at
http://www.irs.gov/pub/irs-pdf/i1040tt.pdf?portlet=3. If we take a couple examples, we can see how
this effects various people.

(Working student example)
AGI $10,000, single
Taxes owed: $1,126

AGI $10,798, single
Taxes owed: $1,239

Difference: $113
---
(Single profesional)
AGI $41,000, single
Taxes owed: $6,814

AGI $41,798, single
Taxes owed: $7,001

Difference: $187
---
(Married couple)
AGI $73,000, married
Taxes owed: $11,371

AGI $73,798, married:
Taxes owed: $11,559

Difference: $188
---

Now keep in mind, this is the 2006 tax table, so come next year, the amound may change
slightly. Also, like I said, technically, you're supposed to recognize the gift as income, even if
it's under $600. With the above, you can take your 1040 and estimate how much in taxes you would had
to pay if this occured in 2006. Even for $188 in income taxes (which will probably only appear to
decrease your return slightly, so you're not losing cash out of pocket), this is a steal. Purchasing
this software at retail would cost around 850 post-tax dollars (i.e. your actual paycheck). To earn
enough gross dollars, you're probably looking at $1100+. You can do the math to calculate how long
it would take to work and earn that money. This offer, even with taxes is a STEAL.

Disclaimer: I am not an accountant. The above is not information is not avice and is not
provided by a certified accountant. Consult your accountant for advice.
 
Wasn't meant for you numbnuts.


| There is absolutly no reason or point to report a freebie.
|
|
|
| | > ? Copied from: http://channel9.msdn.com/ShowPost.aspx?PostID=270923
| > twentw wrote:
| > ------------------------------------------------------------------
| > ?Has anyone actually asked an accountant for an opinion on
| > the taxability of this
| > offer? Microsoft clearly labeled these as "gifts" and gifts are not
| > taxable to the recipient.
| >
| >
| >
| >
| > I have. Everything I have read and heard corroborates that this is
| > the proper way to handle
| > the situation. Although this is a "gift", it is still taxable. If
| > corporations could give "gifts"
| > tax-free... well, there would be a lot (more) tax evasion.
| >
| > The IRS only requires gifts to be reported at the $600 level,
| > however, technically, you're
| > supposed to recognize the gift as income on your taxes, no matter the
| > amount. It will effectively
| > increase your AGI (adjusted gross income). You can look up the current tax
| > table at
| > http://www.irs.gov/pub/irs-pdf/i1040tt.pdf?portlet=3. If we take a couple
| > examples, we can see how
| > this effects various people.
| >
| > (Working student example)
| > AGI $10,000, single
| > Taxes owed: $1,126
| >
| > AGI $10,798, single
| > Taxes owed: $1,239
| >
| > Difference: $113
| > ---
| > (Single profesional)
| > AGI $41,000, single
| > Taxes owed: $6,814
| >
| > AGI $41,798, single
| > Taxes owed: $7,001
| >
| > Difference: $187
| > ---
| > (Married couple)
| > AGI $73,000, married
| > Taxes owed: $11,371
| >
| > AGI $73,798, married:
| > Taxes owed: $11,559
| >
| > Difference: $188
| > ---
| >
| > Now keep in mind, this is the 2006 tax table, so come next year, the
| > amound may change
| > slightly. Also, like I said, technically, you're supposed to recognize the
| > gift as income, even if
| > it's under $600. With the above, you can take your 1040 and estimate how
| > much in taxes you would had
| > to pay if this occured in 2006. Even for $188 in income taxes (which will
| > probably only appear to
| > decrease your return slightly, so you're not losing cash out of pocket),
| > this is a steal. Purchasing
| > this software at retail would cost around 850 post-tax dollars (i.e. your
| > actual paycheck). To earn
| > enough gross dollars, you're probably looking at $1100+. You can do the
| > math to calculate how long
| > it would take to work and earn that money. This offer, even with taxes is
| > a STEAL.
| >
| > Disclaimer: I am not an accountant. The above is not information is
| > not avice and is not
| > provided by a certified accountant. Consult your accountant for advice.
| >
| >
| >
 
Not necessarily true.
I can give you one reason, there are others...Tax Evasion
Especially in this case where information can be expected to be reported
since it was requested.
The fact the items are free is not always relevant and may need to be
reported at fair market value.
Go price the value of Vista and office and you will see the fair market
value are significant.
Ask a tax professional in your location.
Even then what applies to you may not apply to others.
 
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