Some of our clients may have raised money for certain business or charities online by using crowdfunding (i.e. KickStarter, GoFundMe, Patreon etc). It’s important to know that money raised through crowdfunding may be taxable.
Here are some things to know:
- If people donate to a crowdfunding campaign out of generosity and without expecting anything in return, the donations are gifts. Therefore, they will not be included in the gross income of the person for whom the campaign was organized.
- However, keep in mind that not all contributions are gifts, and with the expectation of anything in return, they may be taxable.
- When employers give to crowdfunding campaigns for an employee, those contributions are generally included in the employee's gross income.
- If a crowdfunding organizer is raising money on behalf of others, the money may not be included in the organizer's gross income, as long as the organizer gives the money to the person for whom they organized the crowdfunding campaign.
- People may receive Form 1099-K for money raised through crowdfunding. While this doesn't necessarily mean the income is taxable, an explanation may be required if it is not reported on your tax returns.
If you run crowdfunding campaigns or receive money from one, be sure to keep careful records about the campaign and the disposition of funds for at least three years after filing your tax returns.
If you would like to discuss this further with a member of our Team, please schedule a consultation using this link: https://calendly.com/karasseipeltax