In a recent fact sheet, the IRS provided important guidance on the tax implications of crowdfunding distributions. According to the IRS, funds raised through crowdfunding may be considered part of the recipient's gross income, depending on the specific facts and circumstances of the distribution.
The IRS also highlighted those crowdfunding platforms — or their payment processors — could be required to report these distributions to both the IRS and the recipient if the amounts meet certain reporting thresholds. This reporting is typically done using Form 1099-K, Payment Card and Third-Party Network Transactions.
Crowdfunding, a method of financing projects or ventures by collecting small contributions from many people, is commonly done through online platforms. These campaigns can support a wide range of purposes, from launching a new product or technology to raising money for a charitable cause. Read more.