Tax Tip 2022-120: Some things to know about crowdfunding and taxes

IRS Tax Tips August 8, 2022
Useful Links: IRS.gov Help For Hurricane Victims News Essentials What's Hot News Releases IRS - The Basics IRS Guidance Media Contacts Facts & Figures Around The Nation e-News Subscriptions The Newsroom Topics Multimedia Center Noticias en Español Radio PSAs Tax Scams/Consumer Alerts The Tax Gap Fact Sheets IRS Tax Tips Armed Forces Latest News IRS Resources Contact Your Local IRS Office Filing Your Taxes Forms & Instructions Frequently Asked Questions Taxpayer Advocate Service Where to File IRS Social Media	Issue Number: Tax Tip 2022-120 Some things to know about crowdfunding and taxes Crowdfunding is a popular way to raise money online. People often use crowdfunding to fundraise for a business, for charity, or for gifts. It's important to know that money raised through crowdfunding may be taxable. Some money raised through crowdfunding may be considered a gift. Under federal tax law, gross income includes all income from any source, unless it's excluded from gross income by law. In most cases, gifts aren't included in the gross income of the person receiving the gift. Here's what people involved in crowdfunding should know: 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. 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, not all contributions to crowdfunding campaigns are gifts and may be taxable. When employers give to crowdfunding campaigns for an employee, those contributions are generally included in the employee's gross income. Taxpayers may want to consult a trusted tax pro for information and advice regarding how to treat amounts received from crowdfunding campaigns. People may receive Form 1099-K for money raised through crowdfunding. The crowdfunding website or its payment processor must file Form 1099-K, Payment Card and Third Party Network Transactions with the IRS if: The amount raised is more than $600 Contributors to the crowdfunding campaign receive goods or services for their contributions. If a Form 1099-K is filed, the crowdfunding organizer or the beneficiary of the fundraiser will receive a copy, depending on who received the funding directly from the crowdfunding website. Receiving a Form 1099-K doesn't automatically mean the amount shown is taxable. However, if the taxpayer doesn't include the distributions from the form on their tax return, the IRS may contact the recipient for more information. The recipient may need to explain why the crowdfunding distributions weren't reported. Recordkeeping for money raised through crowdfunding. People who run crowdfunding campaigns or receive money from one should keep careful records about the campaign and the disposition of funds for at least three years. More information: About Form 1099-K, Payment Card and Third Party Network Transactions Understanding Your Form 1099-K General FAQs on Payment Card and Third Party Network Transactions Gig Economy Tax Center Money received through "crowdfunding" may be taxable; taxpayers should understand their obligations and the benefits of good recordkeeping Share this tip on social media -- #IRSTaxTip: Some things to know about crowdfunding and taxes. http://ow.ly/ejbj50KbHoZ Back to top           Thank you for subscribing to IRS Tax Tips, an IRS e-mail service. For more information on federal taxes please visit IRS.gov. This message was distributed automatically from the IRS Tax Tips mailing list. Please Do Not Reply To This Message.

 

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