Apr 26, 2017

Go Fund Me and the Tax Implications

Paul Pocalyko photoBy Paul W. Pocalyko, CPA, CFF, CFE

MoneyLife100During tax season, I had an interesting inquiry from an acquaintance regarding a donation he made to a worthy cause. A relative of his had some significant medical issues, and the bills were piling up. The family had started a Go Fund Me account as a way to raise money for the mounting costs. My acquaintance provided a generous donation that he hoped would be tax deductible. As with any tax question, every situation is different and there are no simple answers.

Generally, he had made a gift that would not be tax deductible. His response was, “OK, it is not big deal for me, but does that mean my sick relative will owe taxes on all those donations? I don’t think they could afford a tax bill.”

There is a good likelihood that no tax would be owed in this instance, but preventative steps should be taken to avoid a long tax battle.

There are many stories about people who raise money through crowd funding sites and wake up one day to find a big tax bill in the mail. Clearly, when someone is gravely ill and facing mounting medical expenses, the last thing on the mind is the tax implications related to the gifts that aided in the payment of obligations. Generally, these individuals believe that the gifts are tax free, and as such the income is never reported on the tax individual’s tax return. In some cases these individuals have so little actual income that a return is never filed. Then the IRS letter shows up indicating that taxes, interest, and penalties are owed – an event triggered by a 1099-K.1

Typically, money raised through a crowdfunding site such as Go Fund Me is processed through third-party settlement entities such as PayPal. IRS rules for those processing entities are very clear regarding the requirement to issue the 1099-K:

The settlement of third-party payment network transactions above the minimum reporting thresholds of

  • gross payments that exceed $20,000, and
  • more than 200 such transactions.2

Thus, a taxpayer that gets a 1099-K should be prepared to deal with that information on the tax return. Just because a 1099-K is issued, however, does not mean that the recipient owes taxes on the funds. One potential manner to report this is to include the amount on the 1040 as “Other Income,” and reflect a negative adjustment in the same amount with the inclusion of a “Statement Concerning” the position taken. If appropriate to the situation and in consultation with a tax professional, a statement could read in part:

All amounts reflected in the 1099-K are excludable from income under IRC Section 102.3 These amounts reflect the money taxpayer received as the result of gifts from donors. Those gifts were used to pay the medical expenses of the taxpayer and are excludable from gross income.

How does one truly know the money was a gift? There is little within the code regarding the definition of a gift, but the tax courts provide some guidance:

Gifts result from "detached and disinterested generosity" and are often given out of "affection, respect, admiration, charity, or like impulses."4

So while the gift my acquaintance made was not tax deductible on his return, with some level of relief, it appeared the donations obtained by his ill family member were not going to create a tax obligation.

The underlying interpretations and rules regarding any Go Fund Me account can create significant tax questions and raise significant tax issues to the recipients.5 Each case is different. If, for example, a now-retired professional athlete has come on hard times and is looking for donations to help with his mounting debt and legal bills, a tax obligation is likely in the athlete’s future for any donations obtained.

When a young, enterprising entrepreneur looking to make her first million is seeking donations to aide in the development of her new software product and its launch, those amounts will be subject to income tax. The profit motive takes away the likelihood of tax avoidance.

So when faced with the need or desire to create a crowdfunding account, it is important to consider consultation with a tax professional who can guide the taxpayer through the myriad issues they may face. No case is ever the same, and each person’s individual circumstances will require separate guidance.

1 https://www.irs.gov/businesses/understanding-your-1099-k
Commissioner v. Duberstein, 363 U.S. 278 (1960)

Paul W. Pocalyko, CPA, CFF, CFE, is senior vice president, construction claims and consulting services, at Hill International Inc. in Philadelphia. He can be reached at PaulPocalyko@hillintl.com.


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  • Mike | Jun 07, 2021
    i’m considering starting a Go Fund Me account for families of India pastors who recently (in the last month) died from covid-19.  I see in a comment above you recommend the request come from India but currently Go Fund Me isnt available to people in India.   So if i set it up it has to come to my bank here and then i have to send it from my bank to India.  If i raise 10000 will i have to pay taxes on it?
  • George Varghese | Mar 11, 2021

    One of my family member  has requested financial help from me for  kidney transplant. However he lives in India. The kidney transplant cost close to $60000.00 (in terms of equivalent currency value).  What are tax the implication  and what do  I need to do show, that the funds that I receive is for the intendent purpose. It  is not clear as the funds that I can potentially receive  will be sent to different country.


    is it better to generate the go fund me request from  India

  • Tony Pfau | Jan 22, 2021

    Really need some information.

    I am trying to help a family in Bahamas raise funds to get life saving surgery for their infant that will be done at hospital in Miami.  They are unable to setup Gofundme themselves and can not be beneficiary since not in same country per Gofundme.  So I'd have to arrange to disburse the funds.  I want to set up fundraiser then pay to hospital directly out of that.  I am worried that I would get a 1099 showing those funds as income and end up with a tax snarl.  Any advice would be greatly appreciated.

  • James DeLuccia | Mar 30, 2020


    Please see the response below from the author, Paul Pocalyko, CPA:

    I am very sorry to hear about this terrible tragedy.  

    Let me start by noting that this is a situation in which an act of kindness could result in many unintended consequences. First, there is no magic formula or algorithm to fully calculate the impact that donations can have upon assistance programs that are in place to help the person who is injured or ailing.  

    My advice is to do the following two steps before anything else:  

    1.     The family should seek out a seasoned CPA who understands the tax implications surrounding donations and beneficial trusts.

    2.     The family should do that in consultation with a special needs attorney.     

    You have raised the issues of Supplemental Security Income (“SSI”) disability assistance and other public benefit programs that may be available to offset the ongoing costs and issues facing your nephew. The eligibility process of public benefits is daunting, lengthy, and uncertain.   

    Please be aware there are many horror stories dealing with the level of audit and analysis that is undertaken regarding a recipient’s earnings, income, cash, and assets.  As a forensic accountant I can assure you that no stone is left unturned during this examination.  It has been compared to an intensive IRS undertaking where bank statements, W-2s, tax returns and other data is checked and cross checked. It is both unforgiving and demoralizing to the family, the victim, and their friends. The eligibility rules related to these situations are complex and can vary by state and location.  The CPA and attorney are needed to sort this out properly.  

    The eligibility oversight becomes even more complex when friends, family, and concerned well-meaning people start Go Fund Me programs or a beneficial trust arrangement. That can create assets for the intended beneficiary and potentially reduce benefit eligibility. You need to work closely with an experienced team of professionals to seek avenues to maximize available benefits and donations. Eligibility rules are strict and must be evaluated on a constant basis. Reporting requirements are rigorous and have short time durations. Failure to follow all these rules can cause the suspension or loss of benefits. 

  • Lisa Chamberlain | Mar 27, 2020

    23 year old Nephew was in accident last week with brain injury. I want to create an account that can help family with unplanned expenses (travel and hotel to be with their son/brother), parents mortgages (as they are self employed and time by their sons beside they are not earning income), and needs nephew may have going forward (transport back to his home state for rehab).

    My Credit Union offers a Benevolent Fund.. not sure exactly how that works.. would that be the correct means to collecting donations or would a crowd funding be best.


    My BIG CONCERN.. is we don't want to impact ANY POTENTIAL SSI/Disability assistance Nephew may need.



  • hmiea,s | Jun 24, 2019

    is it or isn't it? is it taxable under the irs if money is collected through gofund or not, tax implications and being taxed by the irs is not fun, and can be very stressful and time consuming to fight the irs only to whether to win or lose


  • James DeLuccia | Feb 25, 2019


    Paul's response is below.

    Generally no, but it requires careful consideration when you prepare your tax return. You would report it on the tax return and show an offset regarding the charitable purpose and efforts in a Statement Concerning. It is best to consult with your own tax adviser CPA as every situation is different.

    Jim DeLuccia - PICPA Team

  • Lynda | Feb 24, 2019
    Would l have to pay taxes from a GoFundMe account if the money l am collecting is going to help someone else and not myself. I am on a limited income myself and don't want ti end up getting hit wiyh a big tax bill from the IRS.
  • George | Nov 29, 2018

    Hi Paul,

    Same situation with Denise's comment. Any words of advice?

    Thank you


  • Denise | Nov 13, 2018

    I have been asked to help set up a GoFundMe account for my cousin who lives in Mexico. (My mom was the only one of her siblings to emigrate to the US). I was requested to di thisbecause GoFundMe does not support accounts made bynor for citizens of Mexico. 

    How can I help, but avoid being taxed for the donations, as well as avoid being taxed for any significant donation accumulation (once the campaign concludes, assuming successful.). My cousin needs the funds to pay for very expensive chemotherapy.

    thank you

  • James DeLuccia | Oct 05, 2018


    Thank you for your question. According to Paul, there is no "yes or no" answer. It is all fact specific and you should review the details with a CPA tax specialist.  

    Jim DeLuccia - PICPA Team

  • camille | Sep 29, 2018
    I would like to have a Go Fund me accont to pay for my legal fees. Do I have to pay taxes on the money?
  • Noël Johnston | Aug 18, 2018
    I have an indigent, disabled friend who has Section 8 housing and collects a monthly SSI check which covers some, not all of her expenses. She is 53 years old and due to disabilities, not able to do much work.  She seemed like an ideal candidate for a crowdfunding account but she has been told that it (like any 1099 work) would imperil her Section 8 housing, her SSI payments and her benefits.  The benefits are really important to her because her medical bills are substantial. In short, it is almost impossible to figure out how to help her other than simply paying her bills.
  • Steve Cannell | Mar 31, 2018

    I believe that since there is no obligation to pay and no right to receive the donation that it is motivated solely out of personal Benelovance.  A gift under $14,000 by an individual does not have to be for medical reasons and the recipient is free to spend according to their desire...............I'd think even if they invested it in a business.....in any case any gift over $14,000 would still not be taxable to the recipient but maybe a taxable gift by the donor depending on where they stood with the "lifetime" exemption.

    I don't see any case for the inclusion of these fragmented and disinterested payments to be considered income.


    Steve Cannell


  • Paul Pocalyko, CPA, CFF, CFE | Sep 25, 2017
    Because the business appears to be a for-profit business any funds obtained through a Go Fund Me account would be considered income to the business. You would, however, be able to deduct repairs expenses incurred, which could reduce the potential tax impacts.
  • Sarah Hellevang | Sep 22, 2017

    Excellent article and very informative.  Thank you.

    I am looking to start a GoFundMe account after our business building sustained severe damages during Hurricane Irma.  Since this is a business that would ultimately be generating money, would this less likely to be considered a non-taxable gift?




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    Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.