GoFundMe is working - how to manage? Tax implications, etc.

August 5, 2016 7:26 AM

A musician friend received a serious cancer diagnosis last week and his network is quickly mobilizing with a bunch of benefit concerts and a GoFundMe for medical expenses that has been doing well. Now that the pool of donations is hitting some real money, the family is trying to prioritize expenses and make sure they're not stepping into a potential tax liability down the road.

To add to the complications, Joe's brain cancer had made him pretty fuzzy headed for quite a while, and tracking down his financial situation -- bills, royalty checks, etc. -- has made for kind of a messy undertaking in the middle of taking care of the actual medical stuff. I'm trying to help do some information-gathering for them.

I'm wondering if there is a solid guide to managing financial issues for situations such as this - or if the best plan is to find a good accountant to consult with, since it's a unique case (as they all are, I'm sure). There's also sort of the the "ethical" questions about a GoFundMe. For example, can donations for "medical expenses" be used to install a grab bar in a shower?

I've seen few questions about GoFundMe here on this site, and I know they offer some customer service, but was wondering if anyone had some first-hand advice or knew of some good resources.

Please feel free to PM me if you'd rather not post. Thanks!

posted by pantarei70 to Work & Money (6 answers total)

I believe one thing that makes a difference is whether the donations are GIFTS or there are incentives attached--the former reduces, if not eliminates, tax liability.
posted by listen, lady at 7:39 AM on August 5, 2016

I wouldn't trust any advice you receive here. If we're talking about an amount of money that is significant, then consulting with a tax professional is 100% worth the cost.
posted by paulcole at 7:48 AM on August 5, 2016 [8 favorites]

paulcole is definitely right, but, to put your mind at ease in the short term: generally speaking, GoFundMe donations under $14,000 (per person) with no goods or services being provided in return won't be taxable. And, honestly, as long as the donations are going to provide clear benefits for the sick friend (like the grab bar) and aren't being funneled to the organizers or friends/family, the odds that anyone is even going to raise the issue of fraud are, as a practical matter, basically nonexistent. Where people get upset is when the money goes to some clearly unrelated purpose or when it seems to be being used to line the pockets of a related person. So, get the advice, but you're probably not in the middle of a slow-moving apocalypse right now.

Best wishes to your friend.
posted by praemunire at 8:11 AM on August 5, 2016 [3 favorites]

Response by poster: Thanks for the notes so far. And just to clarify - they have accountants and tax people already standing by. No one would take any advice here "to the bank" so to speak -- especially now they're into six figure territory.

I was just posting here more to get some first-hand experiences or informal advice. Gracias!
posted by pantarei70 at 9:52 AM on August 5, 2016

paulcole is definitely right, but, to put your mind at ease in the short term: generally speaking, GoFundMe donations under $14,000 (per person) with no goods or services being provided in return won't be taxable.

The $14,000 limit is for the GIVER. The receiver of gifts can receive an unlimited amount, as I understand it. (Source: research I did for my own GoFundMe for my cancer last year)

GoFundMe question on Turbo Tax's website
posted by MsMolly at 1:42 PM on August 5, 2016 [1 favorite]

Best answer: And I gave my friends an update on what the money they raised for me was being used for (health insurance premiums and deductibles), but that was just because I didn't want them to feel like their money had disappeared into a black hole. There are no requirements, and if you do decide to tell donors where their money went it can be pretty general, broad categories. I don't think any of your friends will expect accountability for individual items.
posted by MsMolly at 1:46 PM on August 5, 2016 [1 favorite]