bank account a taxable gift?

Question

A friend and I had a joint bank account reporting under my SSN. However, I did not contribute any funds to the account. He wanted to put me on the account to avoid going over the FDIC insurance limit at his bank. Is it considered a taxable gift to me under IRS rules?

Answer 1

Something is not right with this picture. Why didn't he just open a second account in another bank? As of the IRS there is no gift tax for the recipient of a gift. If the amount is over $12,000 there may be estate tax issues for your friend. Now, should the IRS get real imaginative they might just say that this "arrangement" is illegal and therefore taxable to you as ill-gotten gain. Depending on the state that you live in or the account is in there could be a state tax issue. All of that said I think that your "friend" is hiding this money from somebody and you are the "cookie jar". Good luck.

Answer 2

If I understand properly, you're desirous to withdraw a great quantity out of your economic corporation account, and purely would desire to make confident it won't count selection as a taxable transaction. in case you're taking the money out for something, say a down charge on a vehicle or abode, you will not get into any situation. it is your account, your money (assuming it is your money and not your mom's), and as you stated taxes have already been paid on it. there is the interest earnings to think of roughly, however the economic corporation will difficulty a 1099-INT to the main fabulous guy or woman, so there is not something to agonize approximately there. purely make confident that in spite of you do with the money is documented. interior the random experience that your tax return gets chosen for audit (do not situation i'm not announcing it will take place, yet purely in case), and the IRS sees a extensive withdrawal, they're going to opt to be attentive to the place the money went, so purely ensure you keep receipts. if youin case you're making plans on giving the money to somone else, or the earnings is in fact your mom's, you would be wanting to benefit with an area preparer to flow over the tax implications of that transaction with you. wish this enables!

Answer 3

Mathew is right. Is the account interest-bearing? If so, you are going to have to report the income on your tax return. As the account is in joint names, you should then issue a 1099 to your "friend" for half of the interest so that he can put it on his tax return.

Yes, I know that is not how interest on a joint bank account gets reported normally (before the tax experts come crashing down on me) but you should, strictly speaking, do that. It might make your "friend" think about this arrangement.