IRS: The Tax Consequences Of Online Crowdfunding

FS-2024-28 (Aug. 2024), IRS Reminds Taxpayers of Important Tax Guidelines Involving Contributions and Distributions from Online Crowdfunding:

Crowdfunding distributions may be includible in the gross income of the person receiving them depending on the facts and circumstances. The crowdfunding website or its payment processor may be required to report distributions of money raised if the amount distributed meets certain reporting thresholds.

Here are some important basics to keep in mind.

Crowdfunding is a method of raising money through websites by soliciting contributions from a large number of people. The contributions may be solicited to fund businesses, for charitable donations or for gifts. In some cases, the money raised through crowdfunding is solicited by crowdfunding organizers on behalf of other people or businesses. In other cases, people establish crowdfunding campaigns to raise money for themselves or their businesses.

Receipt of a Form 1099-K for distributions of money raised through crowdfunding
The crowdfunding website or its payment processor may be required to report distributions of money raised, if the amount distributed meets certain reporting thresholds, by filing Form 1099-K, Payment Card and Third Party Network Transactions, with the IRS. ...

Tax treatment of money raised through crowdfunding
Under federal tax law, gross income includes all income from whatever source derived unless it is specifically excluded from gross income by law. Whether crowdfunding distributions are includible in the gross income of the person receiving them depends on all the facts and circumstances of the distribution. ...

Recordkeeping for money raised through crowdfunding
Crowdfunding organizers and any person receiving amounts from crowdfunding should keep complete and accurate records of all facts and circumstances surrounding the fundraising and 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
• Form 1099-K FAQs
• Gig economy tax center

Prior TaxProf Blog coverage:

• Mirit Eyal-Cohen (Alabama), Tax Incentives for Investment Crowdfunding: A Comparative Analysis, 23 Colo. Tech. L. J. 235 (2024) (reviewed by David Elkins (Netanya) here) 
• Bailey Hans, GoFundMe: The Gift That Keeps on Giving, All Tax Season Long, 172 Tax Notes Fed. 2173 (Sept. 27, 2021)
• Jeffrey Kahn (Florida State), GoTaxMe: Crowdfunding and Gifts, 22 Fla. Tax Rev. 180 (2018) (reviewed by Hayes Holderness (Richmond) here)
• Andrew Wasilick, The Tax Implications of Crowdfunding: From Income to Deductions, 97 N.C. L. Rev. 710 (2019)

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