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
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."
In most cases, donations paid directly to the school by the parents will be tax deductible charitable contributions (unless the school is a for-profit private school). Donations that are passed through a private individual are never tax deductible to the person making the donation, even if the ultimate purpose is charitable. If you receive the payments and give donation receipts indicating that the purpose was charitable or that the donation is tax-deductible, you can get in big trouble. Also, if you receive money from other people and then pay it to the school, you can’t claim it as a tax deductible donation to charity either.
There are no other tax implications of you receiving a gift from parents and then using that gift to buy school supplies, as long as it is clear that you are not performing any services in return for the money. However, at the amounts you are talking about, if go fund me issues you a 1099, you will have to report the donations on your tax return and find some way of convincing the IRS that it was not taxable income to you. Go fund me will also probably deduct substantial transaction fees. I don’t understand why the parents can’t simply pay the school directly.
If there is a PTA, it may already be set up as a tax-deductible organization, and it may be in a better position to accept donations and transfer them to the school than you would be as a private individual.
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
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."
Gifts that you receive are not taxable and do not get entered on your tax return.
Help pay bills for rent lights water and propane. Stroge and fines
Your post was added to someone else's older thread about receiving money from GoFundMe. It is not at all clear whether you are also asking about receiving such funds. You did not even really ask a question.
"Help pay bills for rent lights water and propane. Stroge and fines" is not a question. Please start your own new thread and ask your question--if you have one.
Hi there! I would like to set up a GoFundMe account to raise money to purchase air purifiers for each classroom where my children go to school. I am looking to raise about $20,000 from the parents, and then I would write a check for 100% of the money received (and easily tracked via a bank account that I almost never use) to the school. The school has already purchased the air purifiers with the expectation that we will raise enough money to reimburse them. Will I have any tax obligation or reporting obligation in this scenario? Would it be better to have the school receive the donations directly? I've offered to manage this whole project and am trying to not put this on the school staff who is already maxed out. Thank you so much!
Why not have the donations go directly to the school instead of having GoFundMe take a big chunk of the donated money? And....why not set up an account that is only for the school and not an account in your name?
In most cases, donations paid directly to the school by the parents will be tax deductible charitable contributions (unless the school is a for-profit private school). Donations that are passed through a private individual are never tax deductible to the person making the donation, even if the ultimate purpose is charitable. If you receive the payments and give donation receipts indicating that the purpose was charitable or that the donation is tax-deductible, you can get in big trouble. Also, if you receive money from other people and then pay it to the school, you can’t claim it as a tax deductible donation to charity either.
There are no other tax implications of you receiving a gift from parents and then using that gift to buy school supplies, as long as it is clear that you are not performing any services in return for the money. However, at the amounts you are talking about, if go fund me issues you a 1099, you will have to report the donations on your tax return and find some way of convincing the IRS that it was not taxable income to you. Go fund me will also probably deduct substantial transaction fees. I don’t understand why the parents can’t simply pay the school directly.
If there is a PTA, it may already be set up as a tax-deductible organization, and it may be in a better position to accept donations and transfer them to the school than you would be as a private individual.
Thank you so much for you response! I'll see about going through the PTA.
@lkramer1981 You will end up with a 1099K and have to report it as I posted originally with an adjustment and have to file by mail. you open yourself up to more tax reporting, possible audit. you should NEVER commingle charitable funds with your own personal accounts if there is any way around it. there is no reason not to have the gofundme with the schools info and ein and allow the payment to go via check to the school. Then again personal check direct to the school from each donor are best.