Will the Taxman Cometh Following a GoFundMe for Medical Bills?
Medical bills add up quickly following a personal injury accident. Many times, family and friends eager to help will set up GoFundMe accounts or other donation pages to collect funds to alleviate the financial burden on you and your family. And, while this can bring welcome relief, most recipients wonder whether the income is taxable, and how it needs to be accounted for come April. The good news is that the IRS does not consider proceeds from fundraising campaigns to be a taxable source of income.
But...that's not all. Taxability may depend on how the funds were used, and whether anything was provided in exchange for the donations. This is where things can get a little more complicated. If you have received proceeds from a GoFundMe, consider the following:
1. What was the intent of the organizer?
2. Did supporters receive goods/services in exchange for a donation?
Most GoFundMe's are intended to pay for medical expenses, living expenses, children's college expenses, etc. For tax purposes, the IRS considers this donation as a gift and does not consider this taxable income. However, you may still need to file a Form 1099-K, often provided by crowdfunding sites such as GoFundMe or Paypal when more than $20,000 is donated, or if more than 200 people donated.
Sometimes, the organizer of the crowdfunding campaign may offer gifts in kind from the injured person's business in exchange for a donation. For instance, a T-shirt, free lunch, etc. to encourage people to donate. When this happens it's always best to meet with an accountant. Usually, recipients won't need to pay taxes on the donations because of IRS rules that stipulate an annual $15,000 exclusion. However, it's always best to confirm if there is any doubt or question.
So, what to do with any money leftover after medical bills? If you're fortunate that a GoFundMe covered all of your medical bills, it's up to you to decide what to do with the remaining funds. Many choose to donate it to worthy causes, while others opt to return a % back to everyone who donated. It's up to you and there is no right/wrong answer. Finally, don't worry about accepting a GoFundMe for fear it could reduce a personal injury settlement. The other party cannot use the fact that your medical bills were paid by a GoFundMe to reduce their legal or financial liability for the accident.
For more about crowdfunding to pay medical bills following an accident, contact Welmaker Injury Law at (210) 828-6033.