CPA Matt Bryant discussed the multi-billion dollar trend of crowdfunding and its tax implications Monday on News 8 at Sunrise.
Bryant is the Controller at PharmaSmart International and the President-elect of the Rochester Chapter of the New York State Society of CPAs.
Bryant said crowdfunding, the process of raising money for creative projects or charity via the internet, raised $1.5 billion worldwide in 2013. It can bring large amounts of people together to raise money for a cause, whether that be a business, project, charity or medical need. Crowdfunding has been used to fund movies, CDs, video games and other projects.
It's estimated that in 2012 over one million individual crowdfunding campaigns were started globally. There are over 400 crowdfunding websites including Kickstarter, FundRazr, IndieGoGo, GoFundMe and GiveForward.
Bryant said there are no restrictions in terms of how much money can be raised through crowdfunding. Some people or groups may promise an item at the end of the fundraising process, such as a book or CD.
Some campaigns are set up to allow those seeking funding to keep any amounts raised, even if the total is less than their initial goal. Other campaigns are set as "all or nothing" where those seeking funding only receive funds if they exceed their goal. In either case, the crowdfunding website will take a commission Bryant noted. He added raising funds for a false reason, such as claiming a non-existant medical condition, is fraud and laws are in place to prosecute those responsible.
Bryant said crowdfunding revenue is taxable depending upon the goal of the campaign. If it's obtained to produce a tangible good that will be given to donors at the end of the project, some or all of the related crowdfunding revenue could be taxable. If a group or person obtains crowdfunding for a charitable cause the related revenue is typically not subject to income tax.
Bryant concluded by saying it's a good idea to touch base with your CPA to address the tax issues of your crowdfunding campaign up front.
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