I will be having a steady private income in my bank account, will I be taxed?

Question

My friend is borrowing my bank checking account to do business via ebay and there will be a monthy income into my checking account. I will withdraw the money monthly, but will I be taxed from this?

Answer 1

Think you've answered your own question....you have an income therefore theres a little thing called income tax to think about...

On a side note, you've got to wonder about the wisdom of letting a friends business utilize your personal checking account......

Answer 2

The bank doesn't report transactions to the IRS.  Ebay does not issue tax forms (they simply facilitate the buying/selling process).  Therefore, unless you choose to list it as income on your taxes next year, you will not be taxed.

On the other hand, if you ever get audited by the IRS (they can audit any given year for up to seven years), they will be interested in why your bank account is being used to process ebay transactions, regardless of who is actually buying/selling stuff on ebay.  They could view you as a silent partner in a business.  They could view you as money laundering for your friend.  The IRS can be mean if they think they are not getting their fair share of the profits.  Without providing us more details, what you are describing sounds like an attempt by your friend to avoid paying income taxes, and you are aiding and abetting him in that endeavor.

I was going to end this by asking why you are allowing your friend to "borrow" your bank account, and just read your additional details.  I can name a number of scams that fit exactly what you are describing.  Essentially, you collect money from a number of sales, then cut a check to your "friend" (with you retaining a percentage).  Some short time later, you find that the deposits made to your bank account from the sales are revoked by the bank due to stolen credit cards, claims by the "buyers" that they did not receive the merchandise, etc.  You are now out that check you sent to your "friend", and he suddenly cannot be reached for comment.

Someone in China can sell to the US on eBay.  They can receive payments via PayPal, or open a US bank account.  These things are done everyday.  Don't get involved with this guy.

Check out "ICQ, I Scam You", "Drippy Drop Shipper", and "Tempting Triangle Toss" on the below link for similar scams.  It is a list kept on eBay of known scams.  

Answer 3

As the saying goes there are "Red Flags" here. Quite frankly why would anybody not just open their own eBay account, bank account and Pay Pal  account to run their own business?  As you know, sellers on eBay get paid first, then ship the goods. Lets say your 'friend' ( I use the word in inverted commas intentionally) sells $50,000 worth of goods in the first month. The money is paid into your cheque account. You pay your 'friend' say $45,000 at the end of the month and keep the $5,000 as arranged ( if your commission was to be 10%). Six weeks later you start getting complaints that the goods have not arrived and people are demanding repayment of their funds. Who do you think is responsible to repay this money? Remember that you entered into a legal contract via your eBay account in your name. Their money went to your bank account and now they just want it back. What do you do? Hey, in business there are no friends. Just be careful.

In Australia, recently, one of the biggest sellers on eBay ran into trouble owing thousands of dollars to many buyers for products which failed to be shipped from China. The wholesaler in China supposedly shut down and the seller in Australia is unable to fulfil the contracts for sale of the items. The seller does not now have the funds to refund to the buyers.

Answer 4

This looks like a strategy to hide income from the government so your friend can ride tax free. But it also looks like a way to make you the fall guy if this friend is running a scam.

In effect you will be responsible for tax on earnings resulting from business in this account. Now your earnings will be reduced by money your friend receives, as long as your friend is declaring that income.

But, because this looks like an end run around the IRS, IRS is likely to treat you as co-conspirator if tax goes unpaid, either your income or your friend's.

This is a risk you are prepared to take?

Answer 5

You should NEVER do that, have a joint account or let somebody else "use" it. There is so much that can go wrong.

If your friend failed to pay taxes or committed some sort of scam you would actually be guilty of money laundering, a federal crime.  You better know them very very well and know they have money or they could be setting you up.

There is something very wrong here if your friend doesn't have or can't get their own checking account.

  Don't do it no matter what excuse they give you why they can't do it on their own.  

Wake up.

Answer 6

I agree fully wth the other answers, DO NOT let your friend do this. It sounds like your friend is preparing for something to go wrong, i fully agree with Thor in saying there should be NO reason why your friend cant do this for themselves.

If you REALLY want to, and be prepared for any consequence then as outlined in the answers above, then you should open a completely NEW joint account-thats if you want your name to it. This should be opened as a business account, with ABN numbers or social security or what ever business ownership numbers you have where you live.

Answer 7

A lot depends on the amount of money and the amount of activity. If the number of transactions is high enough, it will trigger a look from the bank and maybe regulators. if the monthly dollar amount is high enough that could also be a red flag. why doesn't your friend simply open a business account? Most banks do them at little or no fees like a personal account. If it is because he can't open a bank account due to various restrictions, I would run, not walk away from letting someone use mine! Remember, if there is any type of fraud or illegal activity in your account caused by your friend, you will do the prision time for them. It is a really bad idea to allow ANYONE access to your account. They won't protect your information as well either. It is not allowed in many states, because it is such a bad idea.  

Answer 8

Why doesn't your friend use his own checking account?  I have said many time once you lend a friend money , he will soon become your ex friend and you'll be stuck with his problems.