My mother lives outside the USA, but is selling a property she has in the USA. I live in the USA. As she does not have a US bank account, she has asked if she can put the money from the sale in my bank account, and then have me transfer it out later to a location of her choosing.
If I do so, will I be liable for income tax or other taxes, on her money, because it was temporarily in my bank account?
There are a few things you have to consider:
If the proceeds from the sale of the home, plus your money, take the balance over the 250K FDIC/NCUA coverage; then some of the money could be at risk if there is a bank failure.
If the money is viewed as gift, she may have to file gift tax forms.
Large international transfers do trigger US government paperwork.
If you were to get sued while the funds are in the bank, expect that the other party will count the funds as yours.
Make sure that have a large bank balance doesn't impact your ability to qualify for any public assistance programs.
Talk to the settlement company and bank, make sure that the money can be deposited in your bank account. They might not want to do a direct deposit without her name on the account. The bank might not want to accept a large check not made out to you.
There is also a consideration for your mother:
Taxes. There might be taxes owed to the US government or State government on the proceeds of the house sale. She needs a plan to pay those taxes even if she isn't in the US and doesn't have a bank account in the US.
You should not use your own personal bank account. Consider setting up a trust account with your mother as the beneficiary.
There are many advantages to this approach, not the least of which is avoiding commingling of funds. You will be acting as a trustee or fiduciary for your mother, so do it right.
This also solves your problem with taxes. There will be no question about who pays any taxes. They will come from the trust account.
The interest you earn while the money sits in your account might be taxable (1099-INT).
Unrelated to taxes, you might get questions about the origin of funds and the large presumably international transfer that follows (AML/terrorist financing).
Legally speaking there is no tax liability for you holding on to your mother's money. You are acting as an agent for her. The money is not income to you. You do not get any benefit from it.
However there might be some issues, most of which centre around convincing the IRS that the money does in fact belong to your mother, and is not a gift to you or some kind of payment if you are unlucky enough to be audited. It's probably worth getting a letter from your mother stating what is going on, including how long the money is likely to be there and when it will be moved out. It would also be a good idea to open a separate account for the money, to make sure it does not get mixed up with your own. If you can persuade your bank to open a joint account with you and your mother, that's worth considering. If not then just a separate account will help convince the tax people that you are just looking after the money. It also ensures that any interest earned goes to your mother and not to you, releiving you of any need to pay tax on it.
The question is completely nonsensical.
It is, of course, UTTERLY INCONCEIVABLE that an escrow or solicitor's office would send the funds of a sale, to, some random third party.
The attorneys involved, the closing company, or the escrow company can of course trivially click it to her bank overseas.
This is utterly commonplace, an everyday occurence.
The only reason the actors involved would possibly want to do something like this is some sort of shady arrangement. (Or, conceivably, they "don't know it's possible to Make Payments from one bank to another" ... or something?)
If you someone achieved this (perhaps by bribing the escrow company?? How?) it would be so bizarre that, almost certainly, the bank would hold the money until Fincen or the cops had a look at the overall situation.
The good news: you’re not technically liable for taxes if it’s not an obligation specified in the tax code. Simply holding money for her should not result in your owing taxes. (Study the tax code at every level of obligation: federal, state, county/village/town, estate).
The bad news: the IRS (and State Depts. of Taxation & Finance) is (are) the only branch(es) of government that traditionally operate with a guilty-until-proven-innocent paradigm.
The reason I have an accountant to answer such questions is that what you are entitled to do does not necessarily suggest what is in your best interest to so do.
So first ask if the potential triggers and red flag nature of doing this outweigh the trouble of doing it a different way. In addition to asking an accountant, you can try to ask the bank. They may not want to offer advice, but some may be implicit in their policies.
And if you decide they don’t and proceed, keep careful records and exchange copies of each others records and hang on tight. We hope you won’t ever need to use them.
It is possible for her to open a US bank account online. Capital One for instance, has free online checking and savings accounts
