Please see this post from @maglib.
This is an area of tax that's still developing. The IRS has handed out big tax bills to people who have received large sums of money on go fund me in the last couple of years (many are still being fought as they can be considered gifts). In order to be non-taxable funds generally have to come through a qualifying charitable organization or be considered gifts (which normally only the payor would have tax liability if excess gifting). If the funds are considered gifts then there are no tax implications for the recipient.
The issue at hand is the 1099-K that the IRS requires be sent to recipient.
Typically, money raised through a crowdfunding site such as Go Fund Me is processed through third-party settlement entities. IRS rules for those processing entities are very clear regarding the requirement to issue the 1099-K:
The settlement of third-party payment network transactions above the minimum reporting thresholds of
- gross payments that exceed $20,000, and
- more than 200 such transactions.
A potential manner to report this is to include the amount on the 1040 as “Other Income,” and reflect a negative adjustment in the same amount with a statement attached to your return (must file by mail then).
Example statement to attach:
"All amounts in the 1099-K are excludable from income under IRC Section 102. These amounts reflect the money taxpayer received as the result of gifts from donors. Those gifts were used to pay the medical expenses of the taxpayer and are justifiably excludable from gross income as gifts."
