Someone wired to my account $10,500 to bail our friend out of jail. I bailed him out. Will I have to pay tax?

Question

The problem is that the jail only excepted cash, so Because it was never my money to begin with, I relinquished responsibility of saying the cash was mine to the jailer; so my friend who I bailed out signed all the paperwork for responsibility for the cash. Hence to say, I personally have no paper trail proof of what I actually did with that cash. I heard that sums over 10g get reported to the IRS and because I over turned the money in such a short time, I didn't know if that would look suspicious to them. I just want to know how I can protect myself from owing if indeed the IRS would audit me.

Answer 1

If you were just doing them a favor and you can account for where the money went, why would you think there would be any tax?

Even if it was a gift to you, the annual gift tax exclusion (in the US) is $12,000, so it would not even need to be reported.  If you was more than that it should be reported by the person giving the gift, but the gift giver would only owe tax if over their $1 million lifetime exclusion.

While banks may keep records of repeated transfers as little as $2000 if they seem suspicious (suspicious activity report), if you have nothing to hide, you have nothing to worry about.

Answer 2

The short answer, No.

This could be considered a gift, and it is below the level that would trigger any gift tax return. You did nothing to earn this money, and indeed you didn't keep it.

And you were a nominee.

Answer 3

It is not income.  You are providing an accomodation.