Crowdfunding is forecast to grow in popularity this year, leading to an added demand for specialized tax advice.
The latest evolution in “passing the hat,” crowdfunding portals allow people to help back a project or a burgeoning company by providing financial contributions on the web. There’s also a philanthropic twist to crowd funding in which individuals and groups can donate to charitable causes or raise money for people who need help covering medical expenses through sites like GoFundMe.com.
Deloitte LLP predicts that this year, crowdfunding portals will raise some $3 billion, up from $1.5 billion in 2011.
But there are potential tax traps for unwary individuals who hope to obtain some funding through the web, and experts warn that the issue of whether a recipient’s small windfall is considered a gift or income could be a gray area.
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