If a friend gives me $25k to save for him, and I deposit into my regular savings, is anything illegal?

Question

Why would I care if it gets reported to the IRS?

Answer 1

Where does somebody get that much money from ... and they want you to put it in your account??? Uh your friend could be commiting tax fraud and making you take the fall for it.

Also how will you guys work out the interest??

This is so dodgy I wouldn't do it even if it was legal - which that sum of money why isn't your friend putting it in their own savings account???

Answer 2

Random thoughts...

1) Any money put in your name could be considered as income, and taxable by the IRS. If your tax rate is 33%, then that's a little over $8000, not counting the time and expense if you get audited.

You definitely are liable for any income from the money. The bank or institution will file a 1099 for any interest or gains on the money, so the IRS will know you have $$ somewhere.

2) Any money that you are "hiding" for him, like if he's going through a bankruptcy or other court case, you could be liable for fraud, or money laundering. Nasty. Bad. Really bad. Don't do that.

3) Are you helping him invest? If your investments don't pan out (like if the bank goes under) then you could be found in breach of "fiduciary duty". Trust me, that would not be good news.

4) If he is an irresponsible jerk, and needs you to keep him honest, go with him to open an account, and either buy a CD, which can't be touched for a certain length of time, or have him open a passbook account, and give you the passbook so he can't get at his money unless he really needs it.

5) Take the money, go to Vegas. 17 is feeling very lucky for me here. Put it all on number 17. Can you feel it? Your friend will think you're great when you win the money! 17! Do it! 17! 17! 17!

Answer 3

Contract law is a field that varies from state to state. The agreement or contract that you and your friend have between you, governs what you may legally do with that money. Oral contracts in some states are just as binding as written ones. If it goes to court, it will be the contract, in whatever form it takes, plus your word, plus your friend's word, that will be weighed for credibility as to WHAT exactly the contract stated.

You will care if it gets reported to the IRS, because 25,000 dollars, even at a modest tax bracket, results in you getting an adjustment to your income tax liability of several thousand dollars! They'll send you a letter dunning you for it. They'll send you certified letters dunning you for it. And, eventually, the following year and every year thereafter, you can kiss your chances of getting any Federal income tax REFUND that you might otherwise have coming to you, GOOD-BYE, until that whole tax liability is discharged, plus any penalties and interest that accrue. For example, if you are in a marginal income tax bracket of 25 percent at your level of income, that 25000 dollars being deposited into a bank account in YOUR name, instantly made you liable NOW, NOT the following April 15th, NOW, for six thousand, two hundred fifty dollars to the IRS. Business owners make quarterly estimated tax payments to the IRS on their profits. You are no different in the eyes of the law. Ignorance of the law is no excuse. It's a real dumb move to deposit that money in YOUR account without paying income taxes on it. And that is just federal tax! There's probably state income tax too, and maybe local income tax, if your area has that.

Answer 4

NO, but if it is "gifted" to you you could be taxed possibly. If anyone asks just say it is yours. I would be careful with taking money from friends though. you dont wanna end up on JUdge JUdy

Answer 5

You will have to pay tax on the interest earned. Plain and simple.

: )

Answer 6

No.