About Cash Gifting

When it comes to cash gifting, it is important to separate fact from fiction. The legality of cash gifting is a gray area and depends greatly on the manner in which the cash gift is given. Although the basis of cash gifting is grounded in the law, the modern day practice of various cash gifting programs are often conducted in an illegal way. Understanding the definition of cash gifting and cash gifting systems may help you recognize the problems with this practice.

Cash Gifting Definition

Cash gifting is a type of wealth sharing approved by the IRS. The IRS states that up to $12,000 can be given to any number of individuals each calendar year and those individuals will not have to pay taxes on that money. However, there is an important caveat to this. The money needs to be given freely, without any expectation of getting anything back in return.

Cash Gifting Systems

Some companies created systems based upon the cash gifting definition approved by the IRS but neglected to keep in mind the important issue of giving the monetary gifts without expecting anything in return. Most cash gifting programs require a fee to join, and this fee is supposed to cover the administrative costs of the program. The premise of these programs are the same; one person joins under another person and gives them a certain monetary gift. That person coerces other people to join under them, with the expectation that those people will then give a certain monetary gift to them.

Problems with Cash Gifting Systems

Unfortunately, cash gifting systems are usually designed as pyramid or Ponzi schemes. The program can survive only if more and more members are recruited. If the program fails to continually recruit new members, the whole organization will collapse and the newest members will be left with no money at all.

Warnings

Many of these systems claim the cash received is a gift and are careful not to call it an investment, but that does not make it legal. Research any cash gifting system thoroughly before joining. The motives of any organization that forces you to make a quick decision or puts any sort of pressure on you should be highly scrutinized. If after researching you are still unsure about whether or not a specific cash gifting system is legal, contact an attorney in the local area or the state attorney general's office.

Filing Complaints

The FTC encourages anyone who feels as though they are victims of a cash gifting system to file a complaint. If you have been involved in a cash gifting scam and would like to file a complain, contact your state's attorney general's office, your local consumer protection agency or the Better Business Bureau. You can also visit the Federal Trade Commission's website to file a complaint (see Resources).

Resources

• Federal Trade Commission
• Cash Gifting Watchdog