The Internal Revenue Service warned Monday that money received through crowdfunding — such as soliciting to fund businesses, for charitable donations, or for gifts — may be taxable.
The crowdfunding website or its payment processor, the IRS said, may be required to report distributions of money raised if the amount distributed meets certain reporting thresholds by filing Form 1099-K, Payment Card and Third Party Network Transactions, with the IRS.
"If Form 1099-K is required to be filed with the IRS, the crowdfunding website or its payment processor must also furnish a copy of that form to the person to whom the distributions are made," the IRS states.
The American Rescue Plan Act clarifies that the crowdfunding website or its payment processor is not required to file Form 1099-K with the IRS or furnish it to the person to whom the distributions are made if the contributors to the crowdfunding campaign do not receive goods or services for their contributions.
Prior to 2022, "the threshold for a crowdfunding website or payment processor to file and furnish a Form 1099-K was met if, during a calendar year, the total of all payments distributed to a person exceeded $20,000 in gross payments resulting from more than 200 transactions or donations," the IRS explains.
For calendar years beginning after Dec. 31, 2021, "the threshold is lowered and is met if, during a calendar year, the total of all payments distributed to a person exceeds $600 in gross payments, regardless of the number of transactions or donations," the IRS said.
