Hi,

A friend of mine who runs an internet business has requested me to accept some money here in the US on his behalf.

He is dealing with a company that has to send him a one time payment of around $15,000 but they are restricted to sending the money to a US resident with a US Tax id and a valid drivers license. So my friend has approached me asking me if I could accept the money on his behalf and then send him the money.

My question is how will this effect my income tax and how should I account for the amount so I don't have to pay tax on the amount.

I don't have a business of my own and I make about $50,000 / year myself.

Any advise will be greatly appreciated.

Thank you

“My question is how will this effect my income tax and how should I account for the amount so I don't have to pay tax on the amount.”--->In general, your friend, as a foreign person, is subject to U.S. tax at a 30% rate on income he receives on U.S source income ,i.e., compensation for his service performed. So, to establish that he is not a U.S. person and to claim that he is the beneficial owner of the income, he needs to file Form W8BEN with his payer, I mean the US firm, NOT with the IRS. W8BEN is used to claim an exception from domestic information reporting and backup withholding or a reduced rate of, or exemption from, withholding as a resident of a foreign country which the United States has an income tax treaty. You are not subject to tax on the money; as the payee name on the company check is not you, but your friend;you can simply write "FOR DEPOSIT ONLY" in the endorsement section on the backside to put the check into your bank account.I guess you can get the funds wired( via wire transfer) to your friend’s bank account overseas as the deposit entails an international transaction. You can have the funds wired directly from your own bank account. Please contact your bank for overseas wire transfer.

Thank you very much Wnhough for your response.

To clarify, the money is going to be sent to me via a bank transfer. And since the payment processing company is only willing to issue payment to US resident it will have to be my name on the transfer. So how would I report these funds as just "in-transit".

The W8BEN form I can have my friend fill out and keep with the issuing company and I guess they have already made him do this. But is this enough for the IRS to identify the funds going to my account is not my income?

I will be transferring the funs out via an international wire transfer, so there will be a paper trail that this is not my income and the funds are in transit.

“And since the payment processing company is only willing to issue payment to US resident it will have to be my name on the transfer. So how would I report these funds as just "in-transit.” “The W8BEN form I can have my friend fill out and keep with the issuing company and I guess they have already made him do this. But is this enough for the IRS to identify the funds going to my account is not my income?”-->Yes I guess so;as you said, your friend overseas NEEDS to file the FORM W8BEN with the US firm paying him, a non- US person, NOT with the IRS.I guess so; W8BEN that the US firm keeps indicates that the firm pays the compensation to him overseas, NOT you in US. You do not file W8BEN with the US firm; you are not a payee.
“I will be transferring the funs out via an international wire transfer, so there will be a paper trail that this is not my income and the funds are in transit.”---> Correct ; as you know, a wire transfer is a transfer of money from your bank account in US to your friend’s account overseas. and as you can see, you need to keep all copies of wire transfer receipts or records or etc as proof for possible IRS audit; keeping good records or copies or etc. is very important to you. Good records will help you to Identify source of information, keep track of necessary information for your tax returns with the IRS or DOR of your state , or to support items or information to be reported on your tax returns.

Thank you very much Wnhough! You advice has been extremely helpful to me.


All the best!