Tax implications for a "donation account"

[kbkids]

I will be calling an accountant in the morning, but just curious if anyone knew. A friend and I are in the process of setting up a bank account for the child that I mentioned in another post that has been diagosed with a malignant tumor. They do have insurance, but it's only paying 60%, and with 42 weeks of chemo and radiation ahead of them, we know the bills are going to be astronomical. So, I have talked to the bank - who says that we can either set it up as a business and get a tax ID (too much headache), or we can use the child's SSN, but they couldn't advise on what kind of tax implications there might be. It will be a checking account, so the interest would most likely be negligible - but not sure on the "gift" part of it how it would work. Anyone had experience with something like this before?

 

[AnaheimGirl]

Hmm, I don't have all the answers, but in general, gifts given to an individual are not deductible by the giver as charitable contributions. If it was set up as a charitable organization under Internal Revenue Code Section 501(c)(3) the givers could deduct their gifts on their tax returns. What I'm not sure of is whether a "charity" set up specifically for one person would qualify. Was that what they were talking about regarding setting it up as a business?

Gift tax would kick in on the giver's side if one person's total gifts in any one year exceeded $11,000. Since they are gifts, the money would not be taxable income to the recipient.

But definitely talk about it more specifically with the accountant. It may be a hassle, but if it's possible to get 501(c)(3) status, it might be worth it, as more people might contribute if they knew they could deduct it.

Good luck, and good for you, for doing this for this child.

 

[kbkids]

Gift tax would kick in on the giver's side if one person's total gifts in any one year exceeded $11,000. Since they are gifts, the money would not be taxable income to the recipient.

That's my main concern. I don't want the family being subjected to any type of tax implications - not so much worried about the givers.

But I do see your point that we may get more donations if they are tax deductible. I'll just have to see what all is involved in getting that done.

Thanks!

 

[Tina]

Yes, you must get a 501c status to keep it tax-free and tax deductible. A number of years ago I worked in a public accounting firm. A former employee had leukemia and our firm handled all of her accounting when a fund was set up for her. She had a 501c setup and a special bank account for donations. See a qualified tax accountant to make sure you cover all your bases. If the person you speak to tomorrow seems unsure, find someone else. Good luck.

 

[disneychrista]

Is it possible to send the "donations" direct to the hospital and have them put in on the childs account?

 

[kbkids]

Is it possible to send the "donations" direct to the hospital and have them put in on the childs account?

I'm afraid that might get too complicated. Around here, you get bills from the doctors, bills from the facilities, bills from the labs, etc. The children's clinic that is doing the treatment is INSIDE the hospital (which is in-network), but yet the treatment clinic is out-of-network.
I think it would be easier for them to just have the cash to send to whichever facility/individual they need it to go to.