Annette Nellen

In Information Letter 2016-0036, released June 24, the IRS explains general rules that might apply to someone’s receipts of funds via a crowdfunding platform. It doesn’t mention any websites, but examples include Kickstarter and GoFundMe. The IRS notes the broad rule of Section 61 that receipt of funds is likely to be taxable gross income.

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Crowdfunding through Internet sites such as and have become convenient and often successful vehicles for fund raising. Would-be businesses use them for start-up funding to get a business off the ground. Others attempt to raise money to fund a new project, frequently a book or musical recording. On the other hand, crowdfunding is also utilized by individuals to help in the event of a personal disaster, for medical bills, or other reasons.  A question that is frequently posed is “are these funds taxable income?” Right now, the answer is “I don’t know.” There is no guidance from the IRS on this, and nothing definitive is likely to be forthcoming until there is a test case that is heard in the court system. And, of course, the IRS is not bound to follow court decisions as they relate to future situations and may announce an acquiescence or Read More