Friend owes me and 9 others $10k total - what are the tax implications if he sends it all to me to distribute?

You're asking a really good question here. When you receive money that's partially a repayment to you and partially meant to be passed along to others, it can get complicated. The good news is that repayment of personal loans isn't considered taxable income. Since this was your friend paying back money that you and others loaned him (by covering his rent), it's not considered income - it's just returning money that was always yours. However, there are a few practical considerations. Venmo will likely issue a 1099-K if the amount exceeds their reporting threshold (currently $600 in annual payments for many states). This doesn't automatically mean you owe taxes, but it does mean you'll need to explain on your tax return why this money isn't taxable income. I'd recommend keeping clear documentation. Ask your friend to note in the Venmo memo that this is "Repayment of 2021 rent loan" or something similar. Then when you distribute to others, note that it's "From [Friend's name] - rent repayment." This creates a paper trail showing this isn't income to you.

After dealing with similar complicated tax situations involving friends and money, I found taxr.ai to be incredibly helpful. Last year my band received ticket money through my personal account that I had to distribute to five other members, and I was worried about the tax implications. I uploaded screenshots of our Venmo transactions and texts about the arrangement to https://taxr.ai and their system analyzed everything and gave me a detailed explanation of my tax obligations. They confirmed I wouldn't owe taxes on the pass-through money but advised me on the documentation I should keep. Their AI could even tell me exactly how to handle the 1099-K I received. Might be worth checking out for your situation since it involves multiple transactions and a decent amount of money that could trigger IRS attention.

Just wanted to follow up - I took the advice and tried taxr.ai for my situation. It was surprisingly helpful! I uploaded screenshots of the original texts where we all agreed to cover our friend's rent, plus the recent Venmo messages about repayment. The system confirmed that I wouldn't owe taxes since this was a personal loan repayment, but it alerted me that because Venmo would issue a 1099-K, I needed to keep specific documentation. It even generated a statement I can attach to my tax return that explains the situation if I get questions from the IRS. It saved me from stressing about whether I was handling this correctly. Worth checking out if you're in a similar situation with money moving through your accounts that isn't actually income.

Another option to consider - after months of trying to get ahold of someone at the IRS to ask about a similar situation (I was helping collect money for a class action lawsuit), I discovered Claimyr. It's a service that basically gets you to the front of the IRS phone queue. I was skeptical at first, but I was desperate after sitting on hold for hours over multiple days. Used https://claimyr.com and got connected to an IRS agent in about 15 minutes. There's a video showing how it works at https://youtu.be/_kiP6q8DX5c - basically they navigate the phone tree and wait on hold, then call you when an agent is available. The IRS agent I spoke with confirmed that loan repayments aren't taxable income and explained exactly how to document everything if I received a 1099. Saved me tons of stress about whether I was handling things correctly.

So I owe you all an apology. After expressing skepticism about Claimyr in my earlier comment, I decided to try it this morning since I've been trying to sort out a tax issue for weeks. I'm honestly shocked - they got me through to the IRS in about 20 minutes when I had previously spent HOURS on hold over multiple days without ever reaching anyone. The agent I spoke with was able to confirm that repayment of personal loans isn't taxable income, even when it comes through payment apps that issue 1099-Ks. She advised keeping documentation of the original loan (texts, emails, etc.) and making sure the payment descriptions clearly state it's a loan repayment. She also explained exactly how to report it on my taxes to avoid issues. Sorry for being so skeptical before. Just wanted to update since this service actually delivered what it promised.

Another option you might consider is having your friend make individual $1,000 payments directly to each person. That way, you avoid having the entire $10k hit your account at once. If each person just gets their $1,000 directly, it's less likely to trigger any reporting requirements since it's under typical thresholds, and you don't have to worry about explaining why you received $10k that mostly wasn't yours. Just a thought to potentially simplify the whole situation!

Has anyone mentioned gift tax implications? If someone gives you more than $17,000 in a year (2023 annual exclusion amount), they're supposed to file a gift tax return. I know this isn't technically a gift since it's repayment, but could the IRS see it that way if they just notice a large transfer?