{"id":17177,"date":"2020-04-09T15:26:35","date_gmt":"2020-04-09T22:26:35","guid":{"rendered":"https:\/\/www.backerkit.com\/blog\/?p=17177"},"modified":"2021-05-12T07:31:55","modified_gmt":"2021-05-12T14:31:55","slug":"crowdfunding-taxes","status":"publish","type":"post","link":"https:\/\/www.backerkit.com\/blog\/crowdfunding-taxes","title":{"rendered":"Crowdfunding and Taxes: What Creators Need to Know"},"content":{"rendered":"<span class=\"cb-itemprop\" itemprop=\"reviewBody\"><p><span style=\"font-weight: 400;\">Whether you\u2019re planning to launch a crowdfunding project or you\u2019ve already hit your goal, it\u2019s critical that you think about the tax implications of your campaign. While this would typically be the height of tax season, the <\/span><a href=\"https:\/\/www.irs.gov\/newsroom\/payment-deadline-extended-to-july-15-2020\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">IRS has extended the U.S. federal tax deadline<\/span><\/a><span style=\"font-weight: 400;\"> from April 15 to July 15, 2020, in response to the <\/span><span style=\"font-weight: 400;\"><a href=\"https:\/\/www.backerkit.com\/blog\/coronavirus-crowdfunding?utm_source=marketing&amp;utm_medium=blog&amp;utm_campaign=april_9_2020\" target=\"_blank\" rel=\"noopener noreferrer\">COVID-19 outbreak<\/a> <\/span><span style=\"font-weight: 400;\">(many state deadlines have been extended as well). Although there are technically a few more months before you have to buckle down and start preparing to file, it&#8217;s never too early to get started. Crowdfunding creators should keep these five factors in mind as they get their taxes ready.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">The difference between taxable income and gifts<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">When you <\/span><a href=\"https:\/\/www.hrblock.com\/tax-center\/income\/other-income\/do-i-have-to-pay-taxes-on-a-gift\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">receive money as a gift<\/span><\/a><span style=\"font-weight: 400;\">, it isn&#8217;t typically considered taxable income. When you receive money through a business transaction or sale, it is <\/span><a href=\"https:\/\/turbotax.intuit.com\/tax-tips\/general\/what-is-taxable-income\/L8lh6lfkJ\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">taxable income<\/span><\/a><span style=\"font-weight: 400;\">. Because of the supportive, often altruistic nature of crowdfunding, the distinction between a gift and taxable income may seem a little unclear. But the bottom line is that while donations on platforms like GoFundMe that are for life events like medical bills or education are generally considered gifts, if you&#8217;re running a Kickstarter or Indiegogo campaign, and your backers are receiving something of value in return for their pledge, the funds are going to be subject to taxes.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Form 1099-K<\/span><\/h2>\n<p><a href=\"https:\/\/www.irs.gov\/businesses\/understanding-your-form-1099-k\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">Form 1099-K<\/span><\/a><span style=\"font-weight: 400;\"> is a summary of a crowdfunding creator&#8217;s sales transactions and is intended to help you report your taxes. It will be sent to campaign organizers with a U.S. bank account whose campaigns raised more than $20,000 and had more than 200 backers. You should receive the form by January 31st, if you received payments in the prior calendar year. Check with <\/span><a href=\"https:\/\/www.kickstarter.com\/help\/taxes?ref=faq_creator_taximplic\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">Kickstarter<\/span><\/a><span style=\"font-weight: 400;\"> and <\/span><a href=\"https:\/\/support.indiegogo.com\/hc\/en-us\/articles\/204738008-Will-I-Receive-a-Tax-Form-\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">Indiegogo<\/span><\/a><span style=\"font-weight: 400;\"> to find out more about what you can expect from the form.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">When filing your taxes, remember that you must report all of the income that you made from your campaign, which can include amounts shown on Form 1099-K, as well as any other money you received. It&#8217;s important to note that creators who don&#8217;t receive Form 1099-K and didn&#8217;t meet that $20,000 threshold <\/span><a href=\"https:\/\/www.nbcnews.com\/tech\/innovation\/raised-money-kickstarter-time-pay-uncle-sam-n51236\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">will still have to pay taxes<\/span><\/a><span style=\"font-weight: 400;\">.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">After you survey your backers, you can download <\/span><a href=\"https:\/\/help.backerkit.com\/article\/583-overview-of-exports?utm_source=marketing&amp;utm_medium=blog&amp;utm_campaign=april_9_2020#account\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">Accounting Reports from BackerKit<\/span><\/a><span style=\"font-weight: 400;\"> that provide a detailed breakdown of the funds you raised during and after the campaign. This will be helpful as you determine how much income you generated from your project.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Keep track of your expenses<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Tracking expenses is a good practice to adopt when you begin any entrepreneurial endeavor \u2014 it keeps you on budget and will reveal any bad spending habits. But when you&#8217;re preparing for tax season, this information could potentially help you save money or protect you during an audit. As a crowdfunding creator, you may be able to deduct project-related expenses, such as <\/span><a href=\"https:\/\/www.backerkit.com\/blog\/guides\/the-practical-guide-to-planning-a-crowdfunding-campaign\/how-to-set-reward-tiers\/?utm_source=marketing&amp;utm_medium=blog&amp;utm_campaign=april_9_2020\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">tier-level gifts<\/span><\/a><span style=\"font-weight: 400;\">, from your taxes. If you have all of your receipts and invoices\u00a0 \u2014 from launch to fulfillment \u2014 your accountant will be better able to determine which deductions you qualify for.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">End of the year crowdfunding projects and taxes<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Launching your project in December could impact your tax preparations. When determining the tax year, <\/span><a href=\"https:\/\/help.kickstarter.com\/hc\/en-us\/articles\/115005136174-What-is-the-1099-K-Form-and-will-I-receive-one-\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">Kickstarter<\/span><\/a><span style=\"font-weight: 400;\"> points out that Stripe, their payment processor, reports the income that you&#8217;ll find on Form 1099-K according to the project deadline date and not the payout date. The payout date is 14 days after the project deadline date. So if your project deadline date was in 2019 but your payout date was in 2020, the funds will apply to your 2019 returns.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Another factor to consider when it comes to year-end projects is your ability to offset expenses that you won&#8217;t incur until the next year. If your income and expenses are in different years, you won&#8217;t be able to deduct expenses, which means you could end up having to pay more income tax and possibly have to dip into the funds you intended to use for your project. <\/span><span style=\"font-weight: 400;\">To safeguard against this, it\u2019s always a good idea to create a funding goal that factors in taxes and the cost of your <\/span><a href=\"https:\/\/www.backerkit.com\/?utm_source=marketing&amp;utm_medium=blog&amp;utm_campaign=april_9_2020\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">pledge manager<\/span><\/a><span style=\"font-weight: 400;\">. You may also end up offsetting some of your tax fees through <\/span><a href=\"https:\/\/www.backerkit.com\/blog\/planning-for-pre-orders-three-stories\/?utm_source=marketing&amp;utm_medium=blog&amp;utm_campaign=april_9_2020\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">pre-orders<\/span><\/a><span style=\"font-weight: 400;\"> and <\/span><a href=\"https:\/\/www.backerkit.com\/blog\/razor-sharp-strategies-for-add-on-sales\/?utm_source=marketing&amp;utm_medium=blog&amp;utm_campaign=april_9_2020\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">add-ons<\/span><\/a><span style=\"font-weight: 400;\">.\u00a0\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Ensuring crowdfunding creators are compliant when filing taxes<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Tax laws can vary by location. For example, depending on where in the U.S. you live, the 1099-K eligibility threshold may be lower. New tax laws will also be introduced from year to year. The best way to make sure that you meet all of your state and federal tax obligations is to speak with a certified tax professional. Even if your project goal was relatively small and your taxes seem straightforward, working with a professional can give you peace of mind during a time that is notoriously hectic.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">No one wants to scramble at the last minute to file their taxes \u2014 it\u2019s stressful and can lead to costly mistakes. If you aren&#8217;t prepared for tax season, now is the time to get started.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you&#8217;re planning your campaign, our webinar on <\/span><a href=\"https:\/\/www.crowdcast.io\/e\/crowdfunding-pre-launch?utm_source=marketing&amp;utm_medium=blog&amp;utm_campaign=april_9_2020\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">pre-launch do&#8217;s and don&#8217;ts<\/span><\/a><span style=\"font-weight: 400;\"> can help you get started. Has your project already been funded? Check out our webinar on <\/span><a href=\"https:\/\/www.crowdcast.io\/e\/crowdfunding-post-campaign?utm_source=marketing&amp;utm_medium=blog&amp;utm_campaign=april_9_2020\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">post-campaign do&#8217;s and don&#8217;ts<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><i><span style=\"font-weight: 400;\">Disclaimer: BackerKit does not provide tax advice. The information presented here is for informational purposes only, and does not constitute tax, legal or accounting advice. Consult a tax attorney, accounting adviser, or your local tax authority regarding the obligations that pertain to your project.\u00a0<\/span><\/i><\/p>\n<p>&nbsp;<\/p>\n<\/span>","protected":false},"excerpt":{"rendered":"<p>Whether you\u2019re planning to launch a crowdfunding project or you\u2019ve already hit your goal, it\u2019s critical that you think about the tax implications of your campaign. While this would typically be the height of tax season, the IRS has extended the U.S. federal tax deadline from April 15 to July 15, 2020, in response to [&hellip;]<\/p>\n","protected":false},"author":49,"featured_media":17197,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[60,62,63],"tags":[],"class_list":["post-17177","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-crowdfunding-tips","category-during-campaign-tips","category-post-campaign-tips"],"acf":[],"yoast_head":"\n<title>Crowdfunding and Taxes: What Creators Need to Know | BackerKit<\/title>\n<meta name=\"description\" content=\"Tax Day is just around the corner. Are you ready? 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