Expert advice on wage garnisheement to gift taxes

Question: If a person cannot pay he or her credit cards because of job cuts, can the credit card company garnishee their wages?

Answer: Credit card companies and other creditors do have the right to garnishee your wages, but they need to get a court order to do so.

They also will be limited to garnisheeing 25 percent of your wages. If what is left is not enough to care for your family, you can go back to court and request an adjustment by the judge.

You should receive a notice before the garnisheement actually happens. At that point, contact your creditor to try to work out some kind of repayment due to financial hardship. In this economic climate, some creditors are happy to get any repayment that is consistent.

Q: How much money can parents give to their adult children without the amount being added to their income? We do not want them to have to pay income taxes on the money. Also, do we mention the gift amount when we file our income taxes?

A: Many people ask similar questions about giving gifts to relatives and friends without realizing a very important fact: The recipient of a gift does not pay income or gift tax on the gift received, no matter how large the gift. So gifts are not reported by the recipient on a federal income tax return.

Gifts can be given to anyone, regardless of age or relationship. However, there usually is a gift tax filing requirement when you give another person (other than your spouse) money or property worth more than the annual exclusion.

The annual exclusion amount is $13,000 for 2009 and 2010. You and your husband each can give $13,000 ($26,000 total) to your child in combined gifts during the year without having to file a gift tax return. Those amounts could change in future years due to inflation.

Excluded from gift taxes are tuition or medical expenses that you pay directly to a medical or educational institution for someone.

It is a good idea to formalize large gifts with some type of written record, in case the recipients need to verify how they came by your generosity.

For more on gift taxes, see IRS Publication 950, "Introduction to Estate and Gift Taxes" at www.IRS.gov or order a mailed copy by calling (800) TAX-FORM (829-3676).