I've been living abroad for 2 years and work as an expat independent contractor. A friend is willing to open a bank account, on his name, exclusively for my use - so my client will send payments to that bank, and once I return to US, I'll retrieve the money.

As far as I know, 1) I can claim up to $100k tax exemption as such a contractor, and - using my friend's account this way, 2) gift tax kicks in past a certain amount, and 3) it increases my friend's (who has no other income) odds of being audited. Questions:

  1. Since I can exempt my own tax, can I also exempt the gift tax?
  2. Are there any other legal/financial considerations?

I agree that generally this trust setup is a terrible idea, but let's put that aside. Also, I'm a US citizen and already have US accounts, though not deposit-ready and there are complications that are simply tedious (and somewhat expensive) to resolve, so I'm checking if there's a simpler alternative. Maybe joint or convenience account?

  • 1
    Is "a friend" a real, flesh-and-blood person, or someone you've "met" online and who suggested this idea? If the latter it screams "scam" (and even if it's real, it sounds dodgy: if you're earning the money, there's no "gift" involved, as far as I can see).
    – TripeHound
    May 22, 2022 at 11:46
  • @TripeHound A decade-old friend, yes. I looked this up, and some results suggested simply transferring money counts as a gift? Is there a source that says it's not so if I earned the money? (I guess it doesn't count as "transfer" if client-to-friend, but he'll eventually transfer it to me)
    – user5656
    May 22, 2022 at 11:48
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    My bank does not allow that my accounts are used by anybody but the account owners (i.e. myself). That's Germany, but your friend might still check his bank's terms of service (part of the reasons are rules against money laundering, so there could be real legal trouble waiting with such an arragement). May 22, 2022 at 13:01
  • 3
    Since you are presumably a US citizen, why can't you open a bank account in your name in the US? May 22, 2022 at 14:01
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    If you try to claim it's a gift, then your friend would be on the hook for the taxes, but most likely, you will be prosecuted for tax fraud should the true nature of the money be exposed.
    – chepner
    May 22, 2022 at 15:30

1 Answer 1


Legally there's probably nothing wrong with it, but you'd want a legal advice from an attorney.

From tax perspective it is not a gift, the money is yours from start to finish, the friend is just an intermediary. However it may potentially trigger IRS audits (that may be quite expensive to resolve and require your friend's cooperation in certifying the arrangement), and may also potentially trigger criminal investigation from financial law enforcement (FBI, IRS, FinCEN, similar agencies in the country where you live) that may see this as a money laundering scheme.

The USA PATRIOT Act in the US requires financial institutions to identify who their customers are and who their beneficial owners are, i.e.: you'll have to disclose this arrangement to the bank.

I'm not an attorney, so take it with a grain of salt and talk to a real attorney, but one potential solution is to create a legal entity (e.g.: LLC or trust), with this arrangement explicitly spelled out in the governing document, and having your friend nominated as the signature authority (LLC manager/trustee) and the bank account to be in the name of the entity.

All that said, I wonder why, as a US citizen, you're unable to open your own account in the US...

  • Thank you. Could you clarify the "quite expensive" part, or reference a reading? Aren't audits free (assuming they find nothing wrong), minus if I choose to hire a lawyer to represent me?
    – user5656
    May 24, 2022 at 16:07
  • @user5656 sure, you don't need to pay for the agent's time. But you'll need to spend day(s) dealing with it, and yes - hire a professional to help you, and any decent CPA/EA/Attorney would charge hundreds of dollars per hour of work.
    – littleadv
    May 25, 2022 at 9:33

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