Legal Question in Tax Law in New Jersey
Threat of being reported to the IRS
I recently withdrew a significant amount of CD's from an account set up for me under the Uniform Gifts to Minors Act. My father has now threatened to report me to the IRS for ''recieving more than $10,000 at a time under the uniform act''. Is that a valid threat, and do I have to pay taxes on that money, even if I've spent most of it?
2 Answers from Attorneys
Re: Threat of being reported to the IRS
Your father is a little confused. Unless you withdrew the money in cash there is no IRS reporting of the withdrawal, even if over $10,000. Cash withdrawals over $10,000 must be reported to the IRS. The gift is not income, but any growth (like stocks that have appreciated in value, interest and/or dividends on the accounts and the like) may be income. So, if the account had income or gains on liquidation of securities, the income or gain is taxable income to be included in your tax return. So, if he bought a stock for $10.00 and when you sold it, it was worth $20.00, the taxable gain would be $10.00 and you are responsible to pay the tax, even if you spent the money for non-tax deductible purposes. I suggest you see an accountant if you have any questions, or call me at 973-377-3313.
Re: Threat of being reported to the IRS
If you are 18 (or 21 in cetain cases) you can access the custodian account. I do wonder how the bank or broker released funds without the signature of the custodian. But you didn't ask that question.
As far as income tax is concerned only income earned in a calendar year is included in your taxable income for that year.
I have no idea about the over $10,000 a year in this context. That limit goes back to when people put money into the account and only applies to gift tax.
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