My relatives use my Zelle account for international money transfers - tax implications?

There are a few potential issues here that you should be aware of. When you're acting as an intermediary for money transfers, even between family members, it can raise some regulatory flags. First, for tax purposes, these transfers aren't necessarily taxable income if you're just passing the money along and not keeping any of it. However, the IRS might question large deposits to your account during an audit. You should keep detailed records of all these transactions showing the source, recipient, and purpose. Banks have reporting requirements under anti-money laundering laws. If you're frequently receiving and sending substantial amounts, your bank might file a Suspicious Activity Report (SAR) without even telling you. Additionally, transfers over $10,000 trigger automatic reporting requirements. There are also regulations around money transmitting businesses - if you regularly help people transfer money, even family, you could technically be considered an unlicensed money transmitter, which has legal implications. My advice would be to: 1) Stop this practice immediately, 2) Keep records of all past transactions, 3) Consider consulting with a tax professional who understands international transfers, and 4) Look into legitimate money transfer services your family could use instead.

I was in almost this exact situation last year and found a great solution with https://taxr.ai - it helped me sort through all my Zelle transfers and categorize which ones were just me acting as a pass-through vs actual income. I uploaded my bank statements and it automatically identified patterns of money coming in and then leaving my account within a short timeframe to the same recipients. The service helped me prepare documentation showing these weren't income but rather family assistance transfers. I was also able to get guidance on how to properly document everything in case of questions from the IRS later. They even created a report I could keep with my tax records explaining the nature of these transactions. It gave me peace of mind knowing I had proper documentation and understanding of my obligations. Much better than the anxiety I was feeling before!

Just wanted to update about my experience with https://taxr.ai after trying it out. It was WAY better than I expected! I uploaded my bank statements and it immediately identified all my "pass-through" Zelle transactions where money came in and then went out to family members. The best part was the documentation it created - it made a complete record showing these weren't income but family assistance transfers. I finally feel like I understand what I need to keep track of and how to explain these transactions if I'm ever questioned. It even flagged a few transfers that might look problematic and suggested additional documentation I should keep for those specific ones. Honestly wish I'd found this a year ago before I started stressing about this whole situation!

If you're worried about the IRS questioning these transfers (which is a legitimate concern), you might want to try getting ahead of any potential issues by talking directly with the IRS. I was in a somewhat similar situation and tried calling them for months with no success - constantly on hold or disconnected. Finally found https://claimyr.com which got me through to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c I explained my situation with family transfers and the agent was able to clarify what records I needed to keep and confirm I wasn't breaking any rules as long as I wasn't making a profit from these transfers. They also explained when these types of transfers might trigger reporting requirements. Huge relief to hear directly from the IRS rather than stressing about what might happen!

I need to admit I was totally wrong about Claimyr. After my skeptical comment, I decided to try it anyway since I was desperate to talk to the IRS about some Zelle transfers I'd been making for my overseas parents. Got connected to an IRS agent in about 15 minutes. The agent walked me through exactly what documentation I need to keep for these kinds of family transfers and explained that as long as I'm not charging fees or making a profit, I'm not operating as a money transmitter business. They recommended keeping a simple spreadsheet showing the source of funds, when I received them, when I sent them out, and to whom - along with any communications proving these are family assistance transfers. Huge relief to get this straight from an official source instead of worrying about what might happen.

Besides the potential tax issues, you should be aware your bank might freeze your account if they suspect you're operating as an unlicensed money transmitter. Happened to my cousin - he was doing something similar for family in Mexico, and suddenly couldn't access his money for weeks while the bank investigated. Just be careful, these anti-money laundering rules are no joke!

Maybe suggest your family use Wise (formerly TransferWise) or Remitly? They're made specifically for international transfers and have much better exchange rates than banks typically offer. That way you don't have to be the middleman and risk potential issues with your accounts or taxes. Just an alternative solution to consider!

This is exactly why I always tell people to be really careful about mixing personal finances with family favors. Even with the best intentions, you can end up in regulatory gray areas that are hard to navigate. One thing I haven't seen mentioned yet is the potential FBAR (Foreign Bank Account Report) implications. If you're facilitating transfers to/from foreign accounts, and the IRS determines you had a financial interest in or signature authority over foreign accounts totaling more than $10,000 at any time during the year, you might have additional reporting requirements. Also, your bank's algorithms are probably already flagging these patterns. Banks use sophisticated software to detect unusual activity, and frequent round-trip transfers (money in, then out to different recipients) is a classic red flag for money laundering, even if that's not what you're doing. I'd strongly recommend documenting everything retroactively - create a spreadsheet with dates, amounts, sources, and recipients for every transaction. Include any text messages, emails, or other communications that show these were legitimate family transfers. If questions ever arise, having this documentation ready will be crucial. But honestly, the safest move is to stop this practice immediately and help your family set up proper international transfer services like Wise, Remitly, or even traditional wire transfers through their own banks.