If the Shoe Fits: Crowdfunding and Taxes
by Miki SaxonA Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here
Forbes had a a useful article bringing spotlighting a prime point abut crowdfunding that often takes a backseat.
This is especially true if you raise substantially more than your stated goal.
Sure, you will probably spend what you raise on development and operations, which eliminates the problem — assuming you have enough of the year in front of you.
Near the end, the article does you a serious disservice.
You may be able to sidestep the whole issue by claiming it was a gift. Here’s where the rules start getting funky, and unclear. That’s because if a backer gives you a lot of cash for a minimal reward, it’s arguably a gift rather a sale. Get a good accountant. (Any gift taxes would be owed by the giver, not the recipient.)
Don’t count on it. When it comes to the IRS, making assumptions in areas that are murky and don’t have clear rules can be a recipe for disaster.
And, as it does say, you need to deal with sales tax State by State.
There’s no question that launching and running a successful crowdfunding campaign takes focus and hard work, but it also requires special expertise.
Just as you wouldn’t ask your a programmer to design hardware, don’t assume that your own skill extends to the tax code.
The cost of a few hours of financial/tax expertise, with proven knowledgeable of the startup world will save you much more than money in both the short and long run.
Image credit: HikingArtist