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I have a friend from Mexico that asked me to buy flight tickets for him. Its about 2,000 dollars, and he's going to give me the money in cash so I can deposit it in my account and pay my credit card.

Also I've done this a couple times where I go out to a club with a bunch of friends from Mexico and I pay the tab for everybody and they pay me cash. Then I deposit that money into my account so my credit card gets paid. Sometimes the tab goes up to a couple thousand.

Could this turn on a red light for the IRS for me making deposits into my account and not declaring them as income?

It's not really income since I'm only getting paid back but for the IRS it could look like it is.

Thank you!

Dheer
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Rolando S.
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2 Answers2

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What you are describing is perfectly legal, and is well under the threshold to attract the attention of the IRS ($10K+). The money is not income, because it is repayment for goods provided or a loan made to your friends. I do this myself oftentimes to take advantage of the rewards on my credit cards. With cash to cover expenses coming in immediately from friends/family, there is virtually no risk.

If you are concerned and want to protect against questions in the future about the source of the money, you ought to start keeping records of dates, times, locations, amounts, and the names of people involved when the charges are made. Then track the dates when the cash is deposited into your bank account. That way you can demonstrate the cash flow (Charge -> Repayment -> Deposit) to anyone who needs to know.

Derek_6424246
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If your friend is paying you same amount as the charge, there should be no problem. If the friend is paying you an amount in excess of the ticket (or in excess of the club tab in the 2nd example), you need to report the excess amount as income.

I would keep the receipts for the purchases, credit card statements, bank statements, and checks/or electronic receipt show your payment of the credit card. If the IRS does question these, you tell them what happened and be able to prove that you made no money off the transaction by providing the statements and receipts.

Firejava
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