How Can Crowdfunding Creators Prepare for Tax Day?: https://www.backerkit.com/blog/crowdfunding-tax. Basically, if you offered crowdfunding backers something in exchange for their pledges, then you likely will owe taxes on the campaign. This is true even if you don’t get a 1099-K from a crowdfunding site because you didn’t meet the requirements of the site for them to send you one. I recommend checking out Stonemaier Games Kickstarter Lessons as he covers things like Legal and Accounting tips on his free blog : https://stonemaiergames.com/kickstarter/lessons/.
It’s a dirty little secret that many who run crowdfunding campaigns find out the hard way. Unfortunately, the 1099-K may not give you all the information you need. Ideally, you discussed this issue with a qualified tax preparer before you started the campaign or have a knowledgeable tax preparer or accountant you use. It’s something you need to factor into your crowdfunding campaign if you offer something in exchange to backers who pledge your campaign. Again, if you are not aware of this and didn’t factor taxes into the equation, you may find yourself in a world of financial hurt come tax time.
This year, the US federal tax deadline is July 15, 2020. If you aren’t already prepared to file, now is the time to get started. Whether you prepare your taxes on your own or hire a professional, you might find that filing after a Kickstarter or Indiegogo campaign is a little more complex than filing personal income taxes. In order to accurately report crowdfunded income, you may need very specific data about when you earned money and where that money came from. While we can’t offer accounting advice, there are a few issues that the crowdfunding creators we’ve worked with often run into, and that you should keep in mind while getting ready for tax season.
Crowdfunding income must be reported on your tax returns
You will need to pay tax after crowdfunding if backers receive something of value in exchange for pledging. Crowdfunded money received as a gift is usually not considered taxable income. When you file your taxes, you should be reporting all of the income you made through your Kickstarter or Indiegogo projects for the year. There are serious consequences, including fines and prosecution, for not reporting all business income or for incorrectly reporting income. We recommend that you speak to a tax professional to ensure that you are meeting all of your tax obligations.
Determining how much money you need to report
The crowdfunding platform you use will send a 1099-K form to you if you raised more than $20,000 with more than 200 backers, and you have a US bank account. The form will detail the gross amount of revenue you earned from crowdfunding transactions, and assist you in reporting your income.
However, the 1099-K form doesn’t tell the full story about how much money you need to report. Here are a couple of reasons why:
- Even if you don’t meet the thresholds for receiving the form, you are still required to report your crowdfunding income.
- According to the IRS website, the form does not “include any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts or any other amounts.”
- Project transactions that were generated outside of Kickstarter or Indiegogo won’t be reported on the 1099-K that you receive from them, but you’ll still have to pay taxes on those funds.
- Some of the money included in the form may be tax deductible.