Taxes and Crowd Funding

Everyone always asks how is the money from crowd funding taxed. The answer is always- it depends. I know you hate that. I hate that too. However, everyone’s situation is different. First of all, you need to let your tax professional know you have gotten funds from crowd funding. You must explain to that person what you are doing and how you are using the money.

If you are a non-profit, the tax consequences will be much different than if you are a for-profit business. If you have actually started a business, the tax consequences will be different than if you do not own any type of business. You have to decide if it is part of your personal taxes or your business taxes. All of this can be done BEFORE you raise money using crowd funding.

In the near future, there will be plenty of tax professionals who specialize in crowd funding situations. Right now you may need to educate them on what you did and exactly how you did it. Have all your records available for them. Show them which websites you used. Have copies of your emails and any offline materials you used to assist them in becoming familiar with crowd funding. Because this is such a new area you have to give them everything they need to set up your taxes correctly. There is nothing wrong with paying what you owe, you just don’t want to pay more than you owe. It takes a forward thinking tax professional to make it work for you.

Here are some No-Cost Workshops on the topic of Crowd Funding: Click Here!

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