I was asked a question today about GFM that I frankly had never thought about. We see GFM’s being set up all the time to help someone or some family through some tragedy. Often we hear that one of these has raised tens or even hundreds of thousands of dollars to support the cause.
The question is, when that sum is eventually delivered to the intended recipient by GFM, is that taxable income to them? Does GFM issue a 1099 to the beneficiary? Despite the big total, would the IRS just assume the individual component donations were all small gifts not subject to reporting or taxation?
In most cases, if you raise more than $20,000 via more than 200 transactions during a year, the crowdfunding platform will file a 1099-K with the IRS to report the income. If the money you raise through crowdfunding is given without receiving something in return, it is considered a gift and is non-taxable. If donors receive rewards in return for their donations, those donations are considered taxable income. If you raise money for a business project, the costs of the project may offset some or all of the taxable income.