Thursday, September 30, 2021
Bailey Hans (J.D. 2021, Notre Dame; LL.M. (Tax) 2022, NYU), GoFundMe: The Gift That Keeps on Giving, All Tax Season Long, 172 Tax Notes Fed. 2173 (Sept. 27, 2021):
In this article, Hans examines the tax consequences of donations made through crowdfunding platforms, focusing on the Duberstein standard and tax policy principles, and she explores ways to provide certainty to donors and donees in the absence of administrative or congressional tax guidance.
This article was entered into Tax Analysts’ annual student writing contest and received the 2021 Christopher E. Bergin Award for Excellence in Writing.
If 17,300 people gave money to Charles and Kayla Gaytan as wedding presents, no one would question that each monetary contribution was a gift. However, when they received money from 17,300 people on GoFundMe, those funds appear inherently different. While both situations are taxed the same, it is useful to question why.
GoFundMe was created to help people like the Gaytans, who were faced with extreme circumstances. When this platform began, it seemed unfathomable to need to contemplate posts like Kellen Riley’s, who recently created a GoFundMe page titled, “Please Help Me Pay My Taxes.” He explains that he “just realized that [he] owes $3,000 in taxes” and says that “anything helps.” Is it an optimal result that someone who realizes that he has to pay taxes should be able to fund those taxes with tax-free money? Further, is it right that GoFundMe can be used both for touching stories like the Gaytans’ and for pleas regarding mundane things like unpaid tax bills? While no one has yet donated to Kellen, it seems that both Congress and the IRS have no problem with this practice — at least, that’s the impression their silence gives.
The prevalence of crowdfunding today necessitates that Congress or the IRS issues some guidelines to regulate the practice of donations-based crowdfunding. More guidance would allow sites like GoFundMe to maintain their integrity as a place for genuine donations and give recipients assurance that they are paying the correct taxes on the funds they receive.