Tax Implications of GoFundMe

[Shooby]

There has been a GoFundMe effort on behalf of a student who is ill and recently graduated from the local HS. DH and I donated. In fact, they have raised over $12K  since they put it up in only about 8 hrs! Anyway what are the tax implications for someone who is the recipient of this? The money will be given to this student's mother. Will the mother have to pay some portion of this as a tax? Not sure how this works exactly? Since the amount is getting fairly significant, you would hate to see someone be hit with a big tax bill that they didn't expect.
 

[msventoux]

If they receive funds over a certain level, it will be reported to the IRS on a 1099-K...I think it's something like $20K.  I haven't really researched it, but I think so far the IRS hasn't pushed getting a cut of the proceeds in medical cases as the money received is seen as a nontaxable gift on the recipient's side.  If an individual gives an amount over the gift tax amount, then the giver is responsible for the taxes, not the recipient.  And since the funds are given to an individual, and not a charitable organization, it doesn't count as a charitable donation by the giver. 

The taxability of funds received is more of an issue for things like Kickstarter or if someone has asked for funds to help start a business.  I think in those cases the IRS would tend to view the funds received as taxable income. 

[justme]

I think I recall that it's counted as a gift so any tax issues would be on the giver not the receiver. But I don't know if that's been tested.

[Deleted]

I don't see how it would easily classify as anything but a gift, as others have said, so no tax for recipient. 

I think the issue can arrise when the fund raiser is not directly in the recipients name, say 'raised for'.... The other person involved can complicate the matter I think...

[Shooby]

Cancer survivor gets $19,000 tax bill for GoFundMe donations


www.dontmesswithtaxes.com/2015/04/cancer-survivor-gets-19000-tax-bill-for-gofundme-donations.html

[Shooby]

  I don't think the IRS has quite figured this one out.  Once a lot of money starts flying around, they are going to be very , very interested.

[Deleted]

And I got a tax bill for 4th quarter son FICA last year. Because IRS responds to what something looks like sometimes. Yes was it inconvenient to file an amended return when I wasn't the one who made the error in the first place, yeah. Did I owe the taxes once I explained why In fact it was not due, no.

[Deleted]

Gifts are not taxable to recipient. That's just end story.

Now if I collect money for blank. Technically I am getting gifts. And then when I gift to the recipient, I may be gifting over the amount and trigger a tax event, i.e. Need to file I gave a gift more than annual max.

[Deleted]

Jul 25, 2016 8:21:54 GMT -5 Shooby said:

Cancer survivor gets $19,000 tax bill for GoFundMe donations


www.dontmesswithtaxes.com/2015/04/cancer-survivor-gets-19000-tax-bill-for-gofundme-donations.html

I'm half asleep, but did the article say why their situation was different?  I've never heard of Gofundme being anything but gift money which is only (potentially) taxable to the one gifting.

[Shooby]

Jul 25, 2016 8:36:34 GMT -5 oped said:

Gifts are not taxable to recipient. That's just end story.

Now if I collect money for blank. Technically I am getting gifts. And then when I gift to the recipient, I may be gifting over the amount and trigger a tax event, i.e. Need to file I gave a gift more than annual max.

www.huffingtonpost.com/steve-rhode/crowdfunding-to-help-a-sick-friend-can-lead-to-a-big-tax-bill-for-you_b_6615616.html

  Well, you can say "that's just the end of the story"  but a 1099 is being generated.

[Deleted]

There may be an issue if she deducted expenses paid by gift maybe? Or if she received income based assistance that she would not have if the crowdfunding assets were counted...?

[Deleted]

This is from we pay but I'm guessing same rules.

As of 2015, the IRS has clarified that WePay is not required to send a Form 1099-K with respect to payments that are made solely as gifts or donations. The purpose of Form 1099-K is to report payments for the provision of goods or services, which may be subject to tax. Gifts and donations typically are not reported as income by recipients, so it is not necessary to send them a Form 1099-K.

[Shooby]

OK.  As i said, not sure of the tax rules.  I would think there is a difference if someone is starting a business or funding a vacation versus medical expenses.  

[Value Buy]

Jul 25, 2016 9:08:30 GMT -5 Shooby said:

OK.  As i said, not sure of the tax rules.  I would think there is a difference if someone is starting a business or funding a vacation versus medical expenses.  

Hillary should go the "Go fund me" way.
She would never have to pay any taxes!
Sure would be simpler than the Clinton Foundation!

[chen35]

The person who set up the gofundme for the step kids half brother (leukemia) got a 1099 from gofundme. They turned around and did a 1099 to the kids mom and step dad (which I get). Whether or not it's a gift or not (and I agree 100% that it is) it's a mess.

[Ombud]

Jul 24, 2016 22:41:40 GMT -5 msventoux said:

If they receive funds over a certain level, it will be reported to the IRS on a 1099-K...I think it's something like $20K.  I haven't really researched it, but I think so far the IRS hasn't pushed getting a cut of the proceeds in medical cases as the money received is seen as a nontaxable gift on the recipient's side.  If an individual gives an amount over the gift tax amount, then the giver is responsible for the taxes, not the recipient.  And since the funds are given to an individual, and not a charitable organization, it doesn't count as a charitable donation by the giver. 

The taxability of funds received is more of an issue for things like Kickstarter or if someone has asked for funds to help start a business.  I think in those cases the IRS would tend to view the funds received as taxable income. 

Correct. www.irs.gov/businesses/understanding-your-1099-k If over 20k + 200 transactions = 15.3% SSA tax due

Third party network transaction means any transaction that is settled through a third party payment network, but only after the total amount of such transactions exceeds $20,000 and the aggregate number of such transactions exceeds 200.

Fair. It is income albeit for a particular purpose

[weltschmerz]

Jul 25, 2016 9:58:32 GMT -5 Value Buy said:

Jul 25, 2016 9:08:30 GMT -5 Shooby said:

OK.  As i said, not sure of the tax rules.  I would think there is a difference if someone is starting a business or funding a vacation versus medical expenses.  

Hillary should go the "Go fund me" way.
She would never have to pay any taxes!
Sure would be simpler than the Clinton Foundation!

Trump should go the "Go fund me" way.

He would never have to pay any taxes!

Sure would be simpler than the Trump Foundation!

**fixed!**

Any ETA on when he's going to release his tax forms?

[Artemis Windsong]

My GrD3 had a go fund me account for a medical issue.  I gave her the money directly because go fund me get 8%.  She could use that more than they can.  It became a shaming for not being listed as a donor.  One sentence cleared that up.

I'm sorry she is having the IRS issue.  Any of the fund raisers could be guilty if the money raised was high enough.

[Ombud]

Jul 25, 2016 18:40:01 GMT -5 Artemis Windsong said:

My GrD3 had a go fund me account for a medical issue.  I gave her the money directly because go fund me get 8%.  She could use that more than they can.  It became a shaming for not being listed as a donor.  One sentence cleared that up.

I'm sorry she is having the IRS issue.  Any of the fund raisers could be guilty if the money raised was high enough.

wait .... are you saying some had an issue for you not being listed on gofundme.com ? WTF

[Ombud]

Jul 25, 2016 18:38:07 GMT -5 weltschmerz said:

Jul 25, 2016 9:58:32 GMT -5 Value Buy said:

Hillary should go the "Go fund me" way.
She would never have to pay any taxes!
Sure would be simpler than the Clinton Foundation!

Trump should go the "Go fund me" way.

He would never have to pay any taxes!

Sure would be simpler than the Trump Foundation!

**fixed!**

Any ETA on when he's going to release his tax forms?

never? Still wondering when the Trump University case will be heard ... but this comment belongs on politics thread

[CCL]

Jul 25, 2016 18:29:21 GMT -5 Ombud said:

Jul 24, 2016 22:41:40 GMT -5 msventoux said:

If they receive funds over a certain level, it will be reported to the IRS on a 1099-K...I think it's something like $20K.  I haven't really researched it, but I think so far the IRS hasn't pushed getting a cut of the proceeds in medical cases as the money received is seen as a nontaxable gift on the recipient's side.  If an individual gives an amount over the gift tax amount, then the giver is responsible for the taxes, not the recipient.  And since the funds are given to an individual, and not a charitable organization, it doesn't count as a charitable donation by the giver. 

The taxability of funds received is more of an issue for things like Kickstarter or if someone has asked for funds to help start a business.  I think in those cases the IRS would tend to view the funds received as taxable income. 

Correct. www.irs.gov/businesses/understanding-your-1099-k If over 20k + 200 transactions = 15.3% SSA tax due

Third party network transaction means any transaction that is settled through a third party payment network, but only after the total amount of such transactions exceeds $20,000 and the aggregate number of such transactions exceeds 200.

Fair. It is income albeit for a particular purpose

Interesting info. I had no idea this even existed.

[Shooby]

They did collect over 20K.  And, this is a very small town, but for a hometown boy, people wanted to help.  That amount was collected in less than 24 hrs via a Facebook post.  It's incredible really.  
  As for the donor list, I think that is kind of part of the appeal of this.  Maybe you could call it "shame" or you could call it acknowledgment or whatever you want.  But, I did read the donor list as it is posted.

[zibazinski]

It's shameful. The IRS picks and chooses who it will go after. If people are stupid enough to contribute to a Go Fund Me, then it's on them. There are people that owe the IRS millions of dollars but they seem to be "untouchable ."

[Artemis Windsong]

Jul 25, 2016 20:03:11 GMT -5 Ombud said:

Jul 25, 2016 18:40:01 GMT -5 Artemis Windsong said:

My GrD3 had a go fund me account for a medical issue.  I gave her the money directly because go fund me get 8%.  She could use that more than they can.  It became a shaming for not being listed as a donor.  One sentence cleared that up.

I'm sorry she is having the IRS issue.  Any of the fund raisers could be guilty if the money raised was high enough.

wait .... are you saying some had an issue for you not being listed on gofundme.com ? WTF

Yes.  The response was I didn't think of that.  That being the 8%.

[Deleted]

I occasionally glance at GoFundMe sites for people/causes I know and the results aren't that great. Yesterday, though, I checked out a page for the poor kid who died on the Verruckt ("crazy" in German) waterslide at Schlitterbahn near here. The goal was to raise $15K for funeral expenses. So far they're over $32K. It's an interesting statement on what moves us. I doubt that someone trying to raise money for new dentures for a beloved elderly Aunt would get quite that response.

And, to get back to the OT, I do hope the friend who set up the site has a plan to make sure the family has to deal with the tax liability and not the friend.