Sponsorship and Donation

[nhfd627]

My son(8) is part of a race team and will be receiving donations and sponsorships. Do I or him have to claim this as income or do anything with taxes? 

[rjs]

Isn't there some organization that is arranging the race, and that the donations and sponsorships go to? Or the team is an organization of some kind? Donations should be made directly to the team or organization, not to your son or to you. Whether the donations are tax deductible by the donors depends on the nature of the organization, but that's not your problem.

[Mike9241]

if they give money to the team it does become their problem. do they get a tax deduction - not unless it's a tax-exempt org.  if it is not it/they may be a subject to income taxes or it may be a hobby. they may have personal liability if the team folds and there are unpaid bills.  if it incorporates and registers as tax-exempt, there are rules that must be followed including the possible need to file Form 990. they really need to consult with a lawyer unless the money given goes to an existing tax-exempt org.  

[Opus 17]

We need much more clarification on what is happening.

If this is not part of a charitable activity or organization, then anything of value (money, merchandise) that your son receives for performing a service is considered self-employment income.  He would be required to keep accurate business records of income and expenses, and pay self-employment tax and income tax on any net profits (income minus expenses).   If your expenses are more than your sponsorship income, then you don't have a taxable profit, and he does not need to file a tax return, but you will need records to prove this in case of audit.

If this is part of a charitable activity (including activities sponsored by public schools, non-profit private schools, and town or county rec leagues), donations and sponsorships should go to the organization to be passed on to participants, and not made to your son personally.

Generally, I think we need a lot more information.