A lot of people are raising money on Gofundme for various causes, but many people don’t know if these donations are taxable.
It’s not easy to ask for help, especially when it comes to money. People want to know that their donations are going towards a good cause and that they won’t have to pay taxes on top of that.
We’re here to clear things up. Is Gofundme Taxable? The answer is yes, donations are taxable. However, there are some exceptions. This article will help you understand exactly how taxable your donations are.
Is Gofundme Taxable? In most cases, Gofundme donations are not taxable. In the United States, any donations made to individual GoFundMe fund-raisers are generally considered “personal gifts,” with the exception of a few.
Additionally, donators are not allowed to deduct their donations.
However, there may be some cases where the income is actually taxable for organizers. For example, if donations are considered to make up part of someone’s earnings.
Is Gofundme Taxable?
If you receive money from a Gofundme campaign, it is considered personal and thus exempt from taxation.
However there could still be taxes owed if the funds were used for anything other than what they were donated towards or exchange value was given during the fundraising period- so keep good records! Consult your tax advisor regarding this matter too since how different campaigns behave will affect their respective outcomes.
The general consensus seems to indicate that these types of donations do not result in any form of tax liability, as long as the money is used for its intended purpose. However
The best practice is that you keep good records of the money donated and how it was spent so if anything comes up you have proof to support your case. As always, consult a tax advisor before making any decisions with regard to taxation.
The IRS finally got around to addressing the issue of crowdfunding in 2016, with Information Letter 2016-0036. The letter doesn’t create new provisions for how individuals should handle crowdfunded money; however, it does point out some factors that could help them determine whether donations fall under another section within Internal Revenue Code (IRC). It comes down to an interpretation of those rules based on what you know about your project and who’s donating to it.
Donations on GoFundMe are generally made to individuals or organizations, not IRS-designated charities. The donor’s contributions are considered “gifts” by him or her and are not deductible. There are two conditions on GoFundMe that allow you:
- Qualified 501(c) Organization: Donations to a GoFundMe campaign for a qualifying charitable organization are deductible. Donors can verify they’re contributing to a tax-deductible, qualified charity by visiting the website’s list of verified organizations.
- “GoFundMe Causes“: GoFundMe launched the GoFundMe Causes and GoFundMe.org websites, which combine qualified charitable organizations by their broad “cause.” Donors make a tax-deductible contribution to the cause of their choice (such as environmentalism, COVID relief, animal rescue, and so on). GoFundMe then disburses the funds to the verified fundraisers and organizations affiliated with that cause.
Campaign organizers should know that donations are not taxable income, but they still need to maintain records of their accounts in order for there not to be any surprises.
- The IRS has recently mandated that third-party payment processors provide a Form 1099 to any individual or organization who earns more than $600 in a single year.
- The IRS is aware of these 1099s, and numerous stories of charity organizers being hit with a large tax assessment for their efforts exist. The IRS does not consider the money collected to be income, but it is the taxpayer’s responsibility to disprove it.
- To avoid a lengthy and costly quarrel with the IRS, get ahead of the problem and report GoFundMe contributions on your taxes before reporting them to the IRS, then deduct the amount from your tax return.
Calculating Taxes On Funds From Gofundme
The IRS has handed out big tax bills to people who have received large sums of money on go fund me in the last couple of years. Many are still being fought as they can be considered gifts, but non-taxable funds generally must come through a qualifying charitable organization, or else it’s just someone giving away their excess property and not subjecting themselves financially – even if there is no written agreement about how much will go towards what specifically with these types donations (or worse yet–gift cards).
The issue is the 1099-K form that the IRS requires to be issued to recipients. Most of the time, funds raised on a crowdfunding platform such as Go Fund Me are handled by third-party settlement organizations. IRS rules for those who handle payments are quite clear: they must generate a 1099-K form.
Third-party payment network settlement transactions that exceed the minimum reporting requirements of
- Gross payments that are more than $20,000 and
- More than 200 transactions like this have occurred.
Using Gofundme Crowdfunding For Your Business.
It isn’t very difficult to confuse crowdfunded money with a present. As a result, it might be taxable revenue—but it depends on the specifics.
When equity crowdfunding generates profits, they aren’t technically “income” since they were generated through donations. It’s legally classified as an investment because you gave the owner equity or a stake in your company in exchange for the collected money; this isn’t taxable income to your business.
It’s always a good idea for campaign organizers to consider the goal of their fundraising. If the objective of fundraising is to raise money for a project that clearly fits into a trade or commercial category outside of the crowdfunding context, it will almost certainly be considered taxable business income.
How To File Gofundme Amount On Your Federal Taxes
If you raised more than $20,000 with over 200 contributors and a valid US bank account, the platform you use will send you a 1099-K form. The form will show your gross earnings from crowdfunding transactions and assist you in reporting your income.
The campaign organizer who receives the cash may receive a Form 1099-K, Payment Card, and Third Party Network Transactions, from crowdfunding platforms in this case from Gofundme.
The IRS launched Form 1099-K, and taxpayers who received the form but did not report the revenue on their tax returns are generally mailed additional notifications.
If a campaign’s purpose is to raise money in exchange for things or services and is interpreted outside of the context of the crowdfunding website, it should be considered taxable business income under Internal Revenue Code 61(a).
State Taxes On Gofundme Campaign Amount
If you accept crowdfunding proceeds from the state in which your business operates, and that particular territory has a sales tax requirement for entrepreneurs like yourself – don’t forget to remit those taxes!
The good news is that, at the state level, some states allow for crowdfunding without requiring sales tax registration before you can receive donations.
The bottom line is that, in the United States, most donations to GoFundMe pages are considered personal gifts and are not tax-deductible. However, there may be some exceptions for organizers who earn income from these donations. If you have any questions about how your donation could be taxed, please consult a tax professional.
Crowdfunding donations are personal gifts, not income. The same is true for Kickstarter pledges and other funding types of crowdfunding projects. However, there may be exceptions for those who earn income from these donations.