Bob's Tax Advice to Becky, the Babysitter

Posted February 7, 2012........................................................(comments welcome)

Two weeks ago,  Bob Brinker advised a caller to deceptively try to negotiate a short sale with the bank on a second home that was underwater. He told caller Bill from Florida:

Bob said:  "If I were you -- this is not something -- during your negotiations with the bank, this is not something I would be talking about. I mean, if you want to go into the bank and you want to say, hey guys, I owe you $120, (000), the properties only worth $60, (000) but guess what, I've got $2 million in  net worth and $700,000 in liquid assets. If you do that, if you do that, you're not going to get a short-sale. But if you go into the bank and say, hey guys, look at this mess. I owe you $120, it's only worth $60, and  it's costing me $13,000 a year, this is awful, please arrange a short sale. If you go in that way, and everything I just said is the truth, then I think you have a shot." 

That was not the first time that Brinker has given advice to do something that some would call fraudulent. Here is a transcript that I posted at Suite 101 three years ago. Fortunately, I saved it because Suite 101 bowed to pressure and destroyed all posts about Bob Brinker from there.  This is lengthy but I think you will find it very interesting. Bob basically tells Becky to consider her wages a gift and not pay taxes on it.

PART ONE

Author: Honeyoneohone (aka: Honeybee) April 10, 2007 9:29 AM):


"Becky, the Babysitter Calls Bob Brinker's Moneytalk"

Bob Brinker recommended that Becky consider $10,400 yearly babysitting wages as a gift and not pay taxes on it:

Bob Brinker: "Becky, in the Bronx, listening to WABC radio - hello Becky."

Becky: "Hi Bob, thank you so much for taking the call and for all your help."

Brinker: "What's up?"

Becky: "Question for you. My only income at this point is from interest and dividends. However, I work at a babysitter and I know I have to report the income. It's paid off the books and I know that I have to report it as taxable. Am I allowed to get an IRA with this income - it's very confusing to me."

Brinker: "Well Becky, any earned income, including babysitting income, would be income that you could designate for in investment in an IRA. Obviously, this would be income that would be on your income tax report. You would be declaring this income. Any income that is received for services rendered - certainly that would include babysitting - it includes golf so I think it should include babysitting. So there you go. You've got the opportunity there to put whatever you want in an IRA up to the $4000 limit for people under the age of 50."

Becky: "Okay, cause when I asked the accountant - maybe he didn't understand - he said I had a W-2 for that."

Brinker: "Well I'd rather you go through that kind of detail with your CPA. But my understanding is that if you have earned income that is declared income, on your tax return that that would qualify. Now how much are you making as a babysitter?"

Becky: "I make about $200 a week."

Brinker: "So you are talking about roughly $2400 dollars a year?"


Becky: "That's it, yeah."

Brinker: "Well, are there rules that apply to the payment of that $200 a week in terms of you being an employee of the individual?"

Becky: "I just work for a woman and I take care of her children, so everything is private."

Brinker: "So she hands you $200 dollars?"

Becky: "Exactly."

Brinker: Well, your accountant is right when he says in order for you to have income going into an IRA, it has to be declarable income - all right? If somebody is paying you $200 dollars a week, er a month - a month?'

Becky: "No, a week."

Brinker:  "Oh, that's $10,400 a year. (Bob corrects math error) All right - if someone is paying you $200 dollars a week to baby-sit their children and they're not taking any taxes out, well that's the same as a gift, isn't it?"


Becky: "Well I still have to report it on my tax."

Brinker: "Why? Why would you have to report it on your taxes? Your employer is allowed to gift you up to $12 thousand dollars a year with no tax whatsoever. Why would you have to put it on your income tax return?"

Becky: "I didn't know that. Thank you."

Brinker: "Well, anybody - let's get the rules straight, okay - has nothing to do with family - nothing. Under current law, under current gift tax law, anybody can give anybody else - every single calendar year - up to $12 thousand dollars in the form of a gift. Okay? (Becky: "Yes.") That means that this employer that you have - this woman whose children you're watching has the right under current gift tax law to give you - with NO taxes - up to $12 thousand dollars a year. And you don't even have to watch her children. She could just hand it to you as a gift because she likes you. (Becky: "Okay.") All right. So your relationship with her is covered by the gift tax law. You see what I'm saying?"

Becky: "Yes, I do."

Brinker: "In other words your saying, well yeah, I watch her children, but she gives me $200 a week in the form of a gift. Ergo, NO TAXES, but you cannot put that money in your IRA. That is not earned income."

Becky: "Okay, and what were you trying to tell me about the golfing before. I didn't follow you - something about golf."

Brinker: "No, I said that you certainly - I said that why shouldn't you get paid for babysitting - people get paid to play golf. People get paid to hit baseballs in the Bronx. Why shouldn't you get paid for babysitting? I have no problem with that. But the point is, if it's not declarable income - it sounds like nobody is declaring it. It sounds like she's not doing a W-2. It sounds like she's not withholding New York State or City taxes. It sounds like she's not withholding Social Security and Medicare. It sound like none of this is going on. It sounds like she's just handing you $200 dollars." (Honey EC: It is illegal to NOT pay Social Security and Medicare taxes on wages.)

Becky: "That's correct."

Brinker: "Well then my advise to you is, consider that a gift. Forget about the IRA, because if you start trying to monkey around with an IRA, well first of all, it's not declarable income, you are going to get your - your going to get the woman in trouble - especially that amount. Consider it a gift because the reality is there would be no tax. But you cannot put that money in an IRA."

Becky: "Okay."

"Thank you Becky. This is Moneytalk__Bob Brinker


Honey EC: I believe that if Becky followed Bob's advise and considered her $10,300 babysitting wages a gift, she would be committing tax fraud. In Part 2, Bob takes a call from a CPA about his advice to Becky and in Part 3, we read how Bob completely changed his story the next day.

                                                                  PART TWO

Author: Honeyoneohone.....April 10, 2007 9:35 AM 


Hugh, the CPA Calls Moneytalk About Becky, the Babysitter


Brinker: "We are back in Omaha. Hello Hugh."

Hugh: "Hi Bob. First time caller - been listening to you for a long time. I'm a CPA here in Omaha. With regard to your babysitter, the code......(Brinker interrupts: "Not my babysitter, the caller was a babysitter.") ".....well, Code Section 102, which excludes gifts from income, does not exclude gifts in the employment arena unless you can show that the payments were made for other than the employment situation."

Brinker: "Yeah, but Hugh, go back to the caller, the caller is working for somebody that is not treating her as an employee in any way, shape or form."

Hugh: "If it's for services, for services rendered, it doesn't matter whether the other person reports it or what they do with it. If it's for services rendered, the funds coming to you, then it is income for income tax purposes."
.
Brinker: "Well, wait a minute, Hugh, I don't disagree with anything you are saying, but if it's for services rendered then the employer, who is paying her $10,400 dollars a year should be treating it as a salaried position with takeout for the City of New York, State of New York, Social Security, Medicare and the Federal Government, if applicable."

Hugh: "Probably should be."

Brinker: "Well, that's the way it should be done - that's not being done."

Hugh: "I agree, but it still constitutes, whether the employer is doing their end properly, it still constitutes income to her."

Brinker:  "Not if it is a gift! There is no employment relationship. There's nothing in any way, shape or form, in a situation - she's not working for some company, there's no corporate return being...uhhh...affected by this. There's nothing being done. (Hugh is talking in background, Brinker talks over him.). "In other words, what you're saying is true if that applies, but in this case there is no history whatsoever that that's what happening."
 
Hugh: "There's no paper trail, but even if there's no paper trail, it still constitutes income to her because the remuneration was for services."

Brinker: "Well that's what YOU say, but if the woman who's hiring the babysitter, ummm...does not say that. If the woman who's hiring the babysitter says, I'm gifting her this money - and she doesn't even have to give a reason, you know that, she can gift anybody she wants - so I'm gifting her this money, and that's the end of it. Then the fact that she's babysitting becomes irrelevant! She can do whatever she wants with her time. If she wants to spend time with the child, that's up to her."

Hugh: "Well, if the whole facts were known, it would constitute income to her and...."

Brinker:  "That's what I said in the first place. That it seems to me that the person who's hiring the person has a responsibility to follow the letter of the law, which is what you're talking about - and I agree with that - and file all the necessary paper work. Obviously, this woman does not want to file papers with the City of New York, State of New York, Federal Government, Medicare, Social Security, so she's just handing her the money. Once she just hands her the money, with no connection to the babysitting, it becomes a gift."

Hugh: Well no. It doesn't BECOME a gift - nobody just knows that it was remuneration for services. And I would agree with you that I wouldn't WANT to file all those papers either."


Brinker (raising his voice as though a very exasperated): "Well, I agree with you 100%, and I agree with everything you're saying 100%. But what I'm saying is as long as the person hiring the babysitter is not going to file all those forms, then it places the person receiving the money in a pretty ridiculous position because what she would have to do - let's stay with your thought of the letter of the law. What she technically should be doing here, Hugh, is turning in her employer for violating the law. (Hugh: "Absolutely.")  "Yeah, she's not going - I mean, I mean, you can tell her to do that, but she's not going to do that - she wants the $10,400 dollars. And this is probably somebody who wants a friend." (Hugh unsuccessfully tries to talk in background.)  "So I mean practically speaking, you know - we can talk about the letter of the law - and I'm in agreement with you 100% and I think the woman should be filing all those documents and I think the woman should be filing it as income. But we both know that the chances of that happening are about as good the Tampa Bay Devil Rays playing in the World Series. It's not going to happen!!!

Hugh: "One of the risks that the employer runs is what if the person becomes injured while in their employ and then they file suit under Workmen's Comp? I mean that...."

Brinker: "And that's very possible while you are babysitting because it's very, very easy, when you babysitting, as we both know to get injured. I mean at least a black eye."

"1-800-934-2221...... Bill's with us in Novato" ____Bob Brinker

                                                                      PART THREE

Honey EC: Here is a transcript of Bob Brinker's comments from the very next day. You will see that rather than admit he was mistaken, he completely changed his tune and tried to rewrite history.   Saturday Bob repeatedly preached to Becky that she should consider her babysitting money a gift. He  never once told  her that would be illegal, or that it was illegal for her employer not to pay SS and Medicare tax. But on Sunday,  Bob misleads the audience about what he had said.  It's too bad for Bob that I have his exact words on record forever. Please note how many times he used the word "illegal" on Sunday. Obviously he had received some "counseling" overnight. 

Author: Honeyoneohone.... April 10, 2007 9:41 AM

Brinker "Recharacterizes" his Tax Advice Comments on Sunday

Bob Brinker: "We had an interesting call on the program this weekend if you missed it, we had a call from a babysitter who was making $10,400 dollars a year - that's $200 a week for babysitting with some children in her neighborhood. It may have been with a friend, maybe not - it doesn't really matter. And she gone to her accountant and tried to open an IRA and her accountant was telling her that since she was not being paid legally that she could not use this money in her IRA.


This of course, would have allowed her, if it was being paid legally to put up to $4000 dollars - because I believe she was under 50 - so she could have put up to $4000 dollars in her IRA account. And she wanted to do that, but her accountant told her that her employer was paying her illegally and so she couldn't do it. And this of course, opened a Pandora's Box for the woman because there's no question she is being paid illegally as we went through on the program in detail.


We pointed out that her employer was breaking the law by not paying Social Security withholding, by not paying Medicare withholding, by withholding for the City of New York. It was a City of New York caller, by not withholding for the State of New York and not withholding for the federal. So there were five major violations being committed by her employer.

Now of course this put her between a rock and hard place because if she turns in her employer for breaking the law by not paying her properly and legally, then obviously, she could easily lose a friendship, if it is a friendship. Certainly she could lose a job. That's for sure. Her employer would be - to put it mildly - very upset to be turned in on something like this even though she's asking for it. Her employer is asking for it by conducting business in this way. So this is the situation that the woman faces. On the one hand, wants to do an IRA contribution but she's being paid illegally. On the other hand, she's faced with turning in her boss for paying her illegally which could easily cost her her job. Talk about a conundrum - that's a conundrum.

Now as far as gifting is concerned: yes, it's true, as we pointed out that you can give up to 12 thousand dollars a year to anybody you want - family or non-family. But it can't be done as a substitute for compensation for services rendered, so it doesn't apply obviously in the situation like that. And it wouldn't help the woman anyway. She wants to put money into her IRA account. You can't put gift proceeds in an IRA account. But it was an interesting call.

This is Moneytalk"______Bob Brinker

Honey EC: Now please go back and read what Bob said to Becky and to the CPA then compare it to what he claimed he said the next day. Was he truthful or did he lie? He couldn't have forgotten overnight. What is that they often say about politicians? It's not the "mistake," IT'S THE COVER UP. ....

There are three classes of men; lovers of wisdom, lovers of honor, and lovers of gain.
__Plato

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