Immigration + Tax implications of stunt money giveaways
February 15, 2020 8:54 PM Subscribe
YANML/ImmigrationAgent/TaxAgent: Suppose you're in the US on a B1/B2 tourist visa, which bans you from earning an income. While you're there, one of those social media stunt philanthropists like Mr Beast or Bill Pulte decide to make you the target of a stunt giveaway and give you, say, $1 million out of nowhere. According to US law, this money is taxed. Does this count as income, and thus are you now deported?
- Does this change if you are on a different US visa? Even ones that have their own income restrictions (such as international students who can only work minimum-wage on campus)?
- Does this change if you are a resident/citizen of a country like Australia that does not tax gift/prize money? Or what the US Government's feelings are on your country of residence (such as sanctions or travel bans)?
- Does the above change depending on your status in your country of residence (for example, an Australian citizen vs an Australian permanent resident with citizenship elsewhere vs international student studying in Australia but was in US for a holiday)?
- Would bringing that money back home raise red flags with your country of residence's tax offices, such as being flagged for money laundering? Does this change based on your residency status?
- Does the fact that you're not going to fill out a W8BEN/W2/similar employment tax form for a one-off stunt (which I highly doubt would be the case even for locals) be to your advantage or would it make things worse? Would a form like that actually help?
- Would you be better off spending that money in the US or waiting to bring that money home? Could you spend some and bring some or would the actions of either raise red flags?
- Does this change if you are on a different US visa? Even ones that have their own income restrictions (such as international students who can only work minimum-wage on campus)?
- Does this change if you are a resident/citizen of a country like Australia that does not tax gift/prize money? Or what the US Government's feelings are on your country of residence (such as sanctions or travel bans)?
- Does the above change depending on your status in your country of residence (for example, an Australian citizen vs an Australian permanent resident with citizenship elsewhere vs international student studying in Australia but was in US for a holiday)?
- Would bringing that money back home raise red flags with your country of residence's tax offices, such as being flagged for money laundering? Does this change based on your residency status?
- Does the fact that you're not going to fill out a W8BEN/W2/similar employment tax form for a one-off stunt (which I highly doubt would be the case even for locals) be to your advantage or would it make things worse? Would a form like that actually help?
- Would you be better off spending that money in the US or waiting to bring that money home? Could you spend some and bring some or would the actions of either raise red flags?
As someone who has accidentally ran afoul of US tax law, I would consult a tax attorney. Being unable to do business with US companies is not a place you want to be. Also I don’t know how you would “bring the money home” as you can’t bring that much to an airport without raising eyebrows and US banks limit transactions over 10k. So what you’re asking is if you can circumvent US tax law and the answer is no.
Tax laws at that level get very complicated to the point where I’m not sure if Mr. Beast type stunts are legal or even real. It goes beyond tax law for giveaways, see the McDonald’s Monopoly fraud as an example. A lot of social media people don’t get this. I know this from first hand experience with social media giveaways (albeit not with anyone mentioned here).
posted by geoff. at 10:01 PM on February 15, 2020
Tax laws at that level get very complicated to the point where I’m not sure if Mr. Beast type stunts are legal or even real. It goes beyond tax law for giveaways, see the McDonald’s Monopoly fraud as an example. A lot of social media people don’t get this. I know this from first hand experience with social media giveaways (albeit not with anyone mentioned here).
posted by geoff. at 10:01 PM on February 15, 2020
If this was a real question, the answer to absolutely talk to an tax attorney - too much at stake to mess around with it.
If it is theoretical, I would start with the fact that prize winnings are reported to the IRS on form 1099-misc in a special box for prizes and award. This means that (1) the IRS is going to be aware of it since the person giving the prize is required to file the 1099-misc and (2) it is clearly not income from employment. So the answer will depend on whether the rules limit income via employment or income via any source.
I think the IRS may also have rules that required the person giving the prize to withhold a certain percentage that is assumed to be enough to cover the presumed federal tax on the prize money so, again, if the person giving prize is following the law, the person receiving the money would have to file tax form get back any excess withholding. (Note: I didn't double check this but I remember reading that people who won cars etc on TV shows like the Price is Right, had to come up with cash to offset the assumed taxes on the stuff they won or sign paperwork saying that they would take responsibility for paying up.
posted by metahawk at 10:37 PM on February 15, 2020
If it is theoretical, I would start with the fact that prize winnings are reported to the IRS on form 1099-misc in a special box for prizes and award. This means that (1) the IRS is going to be aware of it since the person giving the prize is required to file the 1099-misc and (2) it is clearly not income from employment. So the answer will depend on whether the rules limit income via employment or income via any source.
I think the IRS may also have rules that required the person giving the prize to withhold a certain percentage that is assumed to be enough to cover the presumed federal tax on the prize money so, again, if the person giving prize is following the law, the person receiving the money would have to file tax form get back any excess withholding. (Note: I didn't double check this but I remember reading that people who won cars etc on TV shows like the Price is Right, had to come up with cash to offset the assumed taxes on the stuff they won or sign paperwork saying that they would take responsibility for paying up.
posted by metahawk at 10:37 PM on February 15, 2020
The link where you say the money is taxed is talking about gift taxes, but the person getting the gift does not usually pay the tax. The person giving the gift would need to pay any tax required once they reach the lifetime exemption. This is different than a sweepstakes win.
Gifts are unearned income, as are prizes. If that isn't enough, the giftee can always refuse the money.
posted by soelo at 5:01 AM on February 16, 2020
Gifts are unearned income, as are prizes. If that isn't enough, the giftee can always refuse the money.
posted by soelo at 5:01 AM on February 16, 2020
As for the question about public vs private giving, that would not make a difference in taxes at all. You are supposed to report all income even if you have no documentation from the person who gave you the money. A private gift would make it harder to enforce the law, but it would not change the facts.
posted by soelo at 5:04 AM on February 16, 2020
posted by soelo at 5:04 AM on February 16, 2020
For your bonus question, see famous example of Richard Hatch, first Survivor winner. He didn’t file taxes on the million dollar prize he won on national TV, and yep, he went to jail for tax evasion. So if something like this is filmed, you better bet the IRS is watching is and tracking those tax filings and then coming after the winner for the hundreds of thousands of taxes they owe.
posted by DoubleLune at 5:25 AM on February 16, 2020 [1 favorite]
posted by DoubleLune at 5:25 AM on February 16, 2020 [1 favorite]
Response by poster: Wait I'm confused about gift taxes now. It sounds like both the giver and the receiver are taxed for the same thing? Or am I totally misinterpreting it?
(This is wholly theoretical on my end. I'm most interested in the immigration side of things, which I don't think anyone has actually covered yet.)
posted by divabat at 5:41 AM on February 16, 2020
(This is wholly theoretical on my end. I'm most interested in the immigration side of things, which I don't think anyone has actually covered yet.)
posted by divabat at 5:41 AM on February 16, 2020
Response by poster: (which also makes "ask a tax attorney" insufficient because you're not likely to have a local tax attorney if you're visiting from overseas)
posted by divabat at 5:42 AM on February 16, 2020
posted by divabat at 5:42 AM on February 16, 2020
Someone who receives a gift does not pay tax on it.
Someone who gives a gift does not pay tax on it, but does need to let the IRS know about the gift if it is above $15,000 (IRS Form 709).
Someone who repeatedly gives gifts above $15,000 will have some tax issues to deal with if their disclosed-to-the-IRS lifetime giving exceeds $11.4 million.
posted by NotMyselfRightNow at 6:09 AM on February 16, 2020 [1 favorite]
Someone who gives a gift does not pay tax on it, but does need to let the IRS know about the gift if it is above $15,000 (IRS Form 709).
Someone who repeatedly gives gifts above $15,000 will have some tax issues to deal with if their disclosed-to-the-IRS lifetime giving exceeds $11.4 million.
posted by NotMyselfRightNow at 6:09 AM on February 16, 2020 [1 favorite]
which also makes "ask a tax attorney" insufficient because you're not likely to have a local tax attorney if you're visiting from overseas
I mean... if you can find a way to accept a million dollars from a stranger in the US, you can find a way to engage with a local tax expert in the US.
posted by NotMyselfRightNow at 6:18 AM on February 16, 2020 [3 favorites]
I mean... if you can find a way to accept a million dollars from a stranger in the US, you can find a way to engage with a local tax expert in the US.
posted by NotMyselfRightNow at 6:18 AM on February 16, 2020 [3 favorites]
If you win money or prizes on a TV show, or via the lottery, or in a casino, then you have to pay taxes on it as income, and they are supposed to withhold taxes from it before they pay you.
If Abel Magwich and/or Miss Havisham hand you a check for a million dollars, or a series of checks for hundreds of thousands of dollars, then the gift/estate tax may apply (it's the same tax, and the same total applies). They, or their estate, would have to pay any taxes that apply.
posted by Huffy Puffy at 6:46 AM on February 16, 2020
If Abel Magwich and/or Miss Havisham hand you a check for a million dollars, or a series of checks for hundreds of thousands of dollars, then the gift/estate tax may apply (it's the same tax, and the same total applies). They, or their estate, would have to pay any taxes that apply.
posted by Huffy Puffy at 6:46 AM on February 16, 2020
A prize from a TV show, sweepstake, etc is considered a business expense on the giver’s end.
Consult with immigration attorney concerning the legal implications of working while on tourist visa. Seems like a big no-no.
posted by Neekee at 7:07 AM on February 16, 2020
Consult with immigration attorney concerning the legal implications of working while on tourist visa. Seems like a big no-no.
posted by Neekee at 7:07 AM on February 16, 2020
US banks limit transactions over 10k
You will see this falsehood repeated over and over by people who don’t know what they’re talking about. This is why the only financial advice you should take from Internet strangers is “contact an attorney.”
posted by bradf at 7:19 AM on February 16, 2020 [5 favorites]
You will see this falsehood repeated over and over by people who don’t know what they’re talking about. This is why the only financial advice you should take from Internet strangers is “contact an attorney.”
posted by bradf at 7:19 AM on February 16, 2020 [5 favorites]
Best answer: I mean, non-US residents can come to Las Vegas on a tourist visa under which they would have no right to work or earn money, and win money in a casino. This obviously happens EVERY DAY, and it does not affect their immigration status one way or another (though the casino will withhold US income taxes). There are lots of different types of income. Presumably also if you are a foreign student in the US and you're not allowed to work, you can still keep your money in the bank and earn interest on it.
Just because something is taxed and needs to be reported to the IRS doesn't mean it's the kind of income CBP/ICE care about.
posted by mskyle at 7:39 AM on February 16, 2020
Just because something is taxed and needs to be reported to the IRS doesn't mean it's the kind of income CBP/ICE care about.
posted by mskyle at 7:39 AM on February 16, 2020
You are confusing income, with the source of the income. The only form of income generation prohibited the holder of a non-employment visa is work in the United States. They are free to receive taxable prizes, collect dividends and interest on investments, etc. Depending upon the particular nature of the income, the payor may be required to withhold taxes on it in a manner they wouldn't withhold taxes for a person domiciled in the US.
You are quite wrong to assume that someone who is paying a prize would not demand a tax information form (e.g., W8BEN, W-9, 5754) from a recipient.
Most foreign countries don't tax their nationals' US sourced-and-taxable income at all or if they do will award the taxpayer a credit for the amount for which the US assessed, and the taxpayer paid, the tax. The one exception to this might be if there was a tax treaty that covered prizes, but I've never heard of that. (Doesn't mean it doesn't exist).
posted by MattD at 9:03 AM on February 16, 2020 [2 favorites]
You are quite wrong to assume that someone who is paying a prize would not demand a tax information form (e.g., W8BEN, W-9, 5754) from a recipient.
Most foreign countries don't tax their nationals' US sourced-and-taxable income at all or if they do will award the taxpayer a credit for the amount for which the US assessed, and the taxpayer paid, the tax. The one exception to this might be if there was a tax treaty that covered prizes, but I've never heard of that. (Doesn't mean it doesn't exist).
posted by MattD at 9:03 AM on February 16, 2020 [2 favorites]
Response by poster: Interestingly, according to this legal agency, rules around tax and gambling income apply to very specific games. It doesn't necessarily cover all of gambling, and definitely not social media philanthropy. So it might be a very different thing!
posted by divabat at 2:35 PM on February 16, 2020
posted by divabat at 2:35 PM on February 16, 2020
Best answer: Right but that’s FOR TAX PURPOSES, not for immigration purposes. Another way a person could make money without violating a visa with work restrictions would be to earn interest on money kept in a US bank. This would be taxed differently than gambling winnings. Basically there are lots of ways to make money, and the IRS and ICE/CBP care about them in very different ways. As MattD points out, what matters is whether you earn the money by doing *work* inside the US.
posted by mskyle at 3:20 PM on February 16, 2020 [2 favorites]
posted by mskyle at 3:20 PM on February 16, 2020 [2 favorites]
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- Does any of this change if the gift was made public (e.g. a YouTube video with you in it) vs private vs anonymously (as in there is a video or social media post about it but you're not identified)?
posted by divabat at 9:00 PM on February 15, 2020