Are you allowed to give someone cash and how much? The legality of cash-gifting has been questioned for many years and there is still a stigma associated with it. People tend to put “cash gifting” in the category of “scam.”
The question of legal cash gifting actually has several components that usually concern people. The problem is that most people just blob these issues into one thought in their mind and get easily confused on the subject:
QUESTION: Can you gift someone cash legally?
Giving a financial gift or “blessing” to someone, expecting nothing in return is not illegal. What IS illegal is if the organization that you are doing this through is a pyramid scheme. (Where the people at the top get the money and the people below lose their shirt and their sanity.) It is important for you to do your due diligence when investigating a “cash gifting program” that it is not structured this way. How would you be able to tell if a cash-gifting program is not a pyramid? The clearest way is to notice if the program you’re considering will allow for the possibility that the person signing up below you could actually receive MORE gifts than you. This would depend on the structure of the program itself and also on the motivation of the new person. If you have determined that the program is not a pyramid, then you know that you would have no problem participating.
QUESTION: Are you allowed to send money through the mail?
Indeed, you ARE allowed to send money through the mail. What you are not allowed to do is if you send money through the mail for an ILLEGAL ACTIVITY such as money laundering or a pyramid scheme! (But if you read above, you can see that cash gifting is LEGAL.) However, is it WISE to send large amounts of cash through the mail? NO, obviously. In These cases, you should send a money order or a cashier’s check.
Here is a nice article on SNOPES that clarifies:
NOTE: There is a distinction between sending money through the mail and sending to COUNTRIES OUTSIDE THE USA. Exporting or Importing cash will always create problems, so don’t even try that at all. But WITHIN the United States should be no problem.
NOTE: If you research USPS, FEDEX, DHL and USP about “restricted items” they always include “cash” as a restricted item. But… those documents on which cash is restricted are always referring to shipping internationally, regarding tariffs and import and export issues. It is actually not clear about this when you ship within the United States, particularly for lower amounts.
Obviously, for higher amounts, you should consider a money order or cashier’s check or direct wire. Definitely DON’T use PayPal. They will shut down your account!
QUESTION: Are you obligated to pay taxes on gifted income?
ANSWER: IT DEPENDS
Interestingly, if someone were to pay taxes regarding cash gifting, it would be the GIVER. Currently, US IRS law states that you are allowed to give someone up to $13,000/year before the giver OR the receiver would have to worry about paying taxes:
Of course there are many details to the current law and you should read the above document carefully and also consult with your tax advisor.
Since the average gift in a cash-gifting program is between $100-$500, then it would seem that the taxes issue would be a moot point.
IN NO WAY AM I ADVOCATING THAT YOU DO NOT PAY YOUR TAXES.
I am just clarifying that cash received as a gift technically is not taxable in most cases, but you may still declare that money as income and pay taxes on it.
by: Howard B. Richman
Original version of this article is found here.