14 Feb What You Need to Know About Venmo & Crowdfunding
Cancer is expensive. And, unfortunately, there are only so many financial assistance programs available. Crowdfunding has become a common way for people with cancer to get help managing the financial impact of their diagnosis.
But, crowdfunding has some impact on things you may not have thought of, like its potential to impact your eligibility for income-based programs like Medicaid or Supplemental Security Income (SSI).
If you want to learn more about crowdfunding and how to avoid these pitfalls, read our Quick Guide to Crowdfunding.
Crowdfunding also comes with fees and has potential tax implications. Tax time is coming and you may have received a Form 1099-K and don’t know why. Read on to learn more.
Do I Pay Taxes When Crowdfunding?
There's a new Internal Revenue Service (IRS) tax rule that requires crowdfunding websites and payment processors to provide a Form 1099-K.
This form says how much money a person receives, if it is more than $600 in a year. It doesn’t matter how many times someone donated to you or how much each person donates.
But, if the donors to the crowdfunding campaign don't get anything in return for their donations, the crowdfunding website or its payment processor doesn't have to file Form 1099-K with the IRS.
If someone else organizes a crowdfunding campaign for you, and that person is disinterested, detached, and doesn't expect or receive anything in return, the contribution is a gift.
What is Venmo?
Venmo is a payment processor. People use it to transfer money to each other, get paid for services, like personal training, and for crowdfunding. The benefit to using Venmo is that it doesn’t have processing fees.
For personal accounts, the only fee is if you make an immediate transfer; the fee is 1.75% (minimum $0.25, maximum $25). Charities and businesses do pay processing fees, which are still lower than some of the more notable crowdfunding sites.
Do I Pay Taxes When Using Venmo?
The new IRS rule does apply to Venmo. So, if you receive at least $600 in payments through Venmo or another payment app, you can expect to receive a Form 1099-K.
Even though Venmo must send this form, it's important to remember that some amounts on it (like refunds) may not be taxed.
Venmo lets users tag money they send as being for goods and services. It doesn't matter if the payment is for the product you sell, a service you provide, or even an old couch you don't want anymore, the person who's paying for it can decide whether to tag it.
If a payment is tagged as for a good or service, then it is subject to taxes, if you get more than $600 total in the calendar year.
However, payments from friends and family don't qualify for the new reporting requirements – the new rule only applies to payments received for sales of goods and services.
It is important to share this information, so that someone sending you money for crowdfunding doesn’t accidentally tag it as for a good or service.
For more information about managing finances after a cancer diagnosis, visit TriageCancer.org/Financial.
About Triage Cancer
Triage Cancer is a national, nonprofit providing free education to people diagnosed with cancer, caregivers, and health care professionals on cancer-related legal and practical issues. Through events, materials, and resources, Triage Cancer is dedicated to helping people move beyond diagnosis.
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