Crowdfunding Now!

Although the primary purpose of crowdfunding is to help project starters raise money from the crowd, it often provides its own funding procedures. For example, Kickstarter uses an “All or Nothing” method which allows project starters to receive the funds raised only if the crowdfunding campaign reaches it's goal. On the other hand, GoFundMe allows crowdfunding project sponsors to choose between receiving money only once they reach the goal amount or receiving every single contribution from every single backer.  Choosing the right platform depends on the characteristic of the project, but people should aware of the tax issues that come with each method. An "All or Nothing" (AON) strategy is the most frequently used in crowdfunding. This requires project starters set a funding goal prior to launching. They will be able to receive money only if they can confirm the success of the project. After this confirmation, the raised money is transferred to the project creator...

If you are raising money via crowdfunding, do you need to pay taxes? The tricky question is how do you define income from a crowdfunding campaign? You might try to define income as a donation in order to avoid paying taxes. Unfortunately, I don't think this works. Any money derived from an investment effort leading to the delivery of a commercial product is typically taxable, since Federal and State entities see this revenue as ‘income.’ As a result, any ‘project’ in this category is going to be levied at prevailing tax rates, whether it is offered as art, technology, or manufactured goods. No matter you want to manufacture a bike, make a movie, or create a video game, you need to pay taxes. The only exception is Non-Profit (NP) or Non-Government Organization (NGO), and you need to get recognition from the IRS for these. Of course, taxes are based on income. The cost of reward fulfillment can be considered an expense. My suggestion is to recognize the cost of reward fulf...