charity


A

Allan Adler

I'm a mathematician who has been unemployed for most of his
professional life. Apart from a total of 5.25 years teaching
at universities, over a span of about 25 years, the last of
which was in the year 2000, most of my employment, has been
at a subsistence level at mathematical research institutes,
most of which have been in foreign countries. The
universities were MIT, Brandeis and Ohio-State in Columbus.
The research institutes are: (1) Institute for Advanced
Study in Princeton; (2) Mathematical Sciences Research
Institute in Berkeley; (3) Tata Institute for Fundamental
Research in Bombay; (4) Max-Planck-Institut-fuer-Mathematik
in Bonn; (5) Institut des Hautes Etudes Scientifiques. On
some rare occasions, I've also been hired as a mathematical
consultant without soliciting such employment. In the course
of my career, these have totalled about $35,000, including
about $1500 that I earned from private tutoring last year. I
am active in my research and my work is respected. For me,
mathematics and scholarship is not a job, it is a way of
life and I do it whether I am employed or not. Most of the
time in which I've done my work, I have been unemployed and
living on charity. Such was my condition, for example, when
I published my book, "Moduli of Abelian Varieties" (Springer
Lectures Notes in Mathematics #1644). It says very clearly
at the end of the preface that, most of the time I worked on
the book, I was unemployed and living on charity.
Springer-Verlag, the publisher, looks with indifference on
the survival of its authors and that is par for the
publishing industry and for the mathematics profession as a
whole. For me, what matters is that I like mathematics and
I continue to study it.

As a result of this devotion to my art, I have had very
little taxable income in the course of my career and
consequently very little money has accumulated towards
social security. As things stand now, if I retire I can look
forward to living on $500/month for the rest of my life. I
am almost 60 years old. Presently I am living on charitable
contributions which exactly cover my expenses. I have no
health coverage; apart from one visit to an ear doctor last
year and regular dental cleanings, I haven't seen a doctor
in years. I once discussed with a social worker whether I
could get some support for medical care and it appears that
I don't qualify for various reasons. Apart from issues about
how much I have in the bank and the schedule under which I
get my checks, there seems to be no way to prove that I
won't also make money from sources that funding agencies
don't know about, such as consulting and tutoring, since I
am perfectly capable of doing such work and have done it in
recent memory. Anyway, things seems to be arranged in such a
way that in order to take advantage of such funding, one has
to make a genuine commitment to dependence on it and to
configure one's life and finances accordingly. I'm not
willing to do that.

Charitable contributions are considered gifts and I don't
have to pay taxes on them. Therefore they don't contribute
to my social security account. That is the problem I would
like to deal with. Do I have the option of declaring these
gifts as income and paying taxes on them in order to have
them contribute to my social security account? I can imagine
that the answer might be no. On the other hand, what about
the case of someone who spends 8 hours a day panhandling on
the streets, or washing windshields at traffic
intersections, and accumulates a certain amount of money
annually? That person is clearly working and I would think
that the money he earns thereby is taxable, if he earns
enough, even though it is really charitable on the part of
his "clients". To give a more mainstream example, waiters
and cab drivers work in part for tips and I think that the
tips are taxable, even though they are not part of the
contractual arrangement with the client and are arguably
charitable contributions.

Can someone please clarify the law regarding this? Of
course, if I had a job (in the US), the point would be moot,
since the job would contribute to social security. But I
don't believe I will ever have another job. And, in the
unlikely event that someone were to offer me one, I would
turn it down if it didn't leave me most of my time free to
pursue my scholarly interests as I see fit.
 
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L

L K Williams

SNIP
Do I have the option of declaring these
gifts as income and paying taxes on them in order to have
them contribute to my social security account? I can
imagine that the answer might be no.
SNIP

Can someone please clarify the law regarding this? Of
course, if I had a job (in the US), the point would be moot,
since the job would contribute to social security. But I
don't believe I will ever have another job. And, in the
unlikely event that someone were to offer me one, I would
turn it down if it didn't leave me most of my time free to
pursue my scholarly interests as I see fit.
If you are approaching 60 and already have the necessary
credits to qualify for social secutiry, I doubt that current
contributions would be a good investment. Because your
benefit under social security is based on the average of
income (adjusted to current dollars) over the 35 highest
earning years, any new earnings are unlikely to add
significantly to you monthly benefit. In other words, the
return on the additional social security tax you would pay
would be minimal. You are almost certainly better off
putting money in your own retirement savings account, even
if not tax deferred, than paying it to social security.

I have only done one actual cost/benefit analysis (for
myself) but have discussed this matter with many clients.
In every case, the return on the investment obviously has
been too low to be attractive.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans
 
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T

TxSrv

Allan said:
I'm a mathematician who has been unemployed for most of his
professional life...
As a result of this devotion to my art, I have had very
little taxable income in the course of my career and
consequently very little money has accumulated towards
social security.
Do I have the option of declaring these
gifts as income and paying taxes on them in order to have
them contribute to my social security account? I can imagine
that the answer might be no.
You imagine correctly. Filing false returns is, on paper, a
crime, as is Social Security benefit fraud, if gov't can
prove you willfully filed things this way with IRS. However,
these points are moot, as you can only amend the last 3
years to report any unreported income item properly subject
to FICA taxes, meaning also reporting in the year of
receipt. SSA will not accept SS earnings if the IRS
(3-year) statute is barred.

Thus, if you did omit genuine FICA income way back, IRS will
accept real old, barred, amended returns as voluntary
payments, but SSA cannot under law credit them to your
earnings record. Also, adding money to your last three
years of earnings usually has little effect on your annuity.

Fred F.
 
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S

Shyster1040

Quick question: when you say you are currently surviving on
"charity," what, exactly do you mean? Who's paying it to
you, and for what reason(s)?
 
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P

pleasedontemailme

snipped the original because it was long
Charitable contributions are considered gifts and I don't
have to pay taxes on them. Therefore they don't contribute
to my social security account. That is the problem I would
like to deal with. Do I have the option of declaring these
gifts as income and paying taxes on them in order to have
them contribute to my social security account?
Unless you are a recognized charity with 501(c)(3) or
similar exempt status, you are not receiving charitable
contributions as defined by the IRS. You may be receiving
non-taxable gifts or a qualified fellowship.

If your concern is adding to your social security income,
there are two issues. First, you need 40 quarters over your
lifetime to qualify for Social Security payments on
retirement. Second, the benefit amount is calculated based
on an indexed average of the 35 years with the highest
earnings.

If you do not have 40 quarters, declaring self-employment
income equal to or exceeding the personal exemption amount
will garner you four quarters for the year. After
self-employment tax and EIC (assuming no dependent
children), it's roughly a wash tax-wise in most years. (I've
prepared many, many returns for younger, SS-savvy,
residence-challenged VITA customers over the years and am
assured this works.)

This approach probably will not increase your indexed
average income and thus your benefit amount. If increasing
your benefit is your goal, securing a full-time paid job for
the next seven years may be the best approach.

-Crystal
 
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B

Barry Margolin

Allan Adler said:
Charitable contributions are considered gifts and I don't
have to pay taxes on them. Therefore they don't contribute
to my social security account. That is the problem I would
like to deal with. Do I have the option of declaring these
gifts as income and paying taxes on them in order to have
them contribute to my social security account?
When you get money from social security, you're just getting
back money that you contributed in the first place, plus
whatever it earned since you contributed. You can achieve
pretty much the same thing by putting the money you would
contribute to SS into savings accounts, CDs, or mutual
funds.
 
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A

Allan Adler

Thanks very much for answering my questions. The replies
were very helpful.

--
Ignorantly,
Allan Adler <ara@zurich.csail.mit.edu>
* Disclaimer: I am a guest and *not* a member of the MIT
* CSAIL. My actions and comments do not reflect in any
* way on MIT. Also, I am nowhere near Boston.
 
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