Crowd funding is still very new and all the rules are not written yet. Your tax advisor may not even know what crowd funding is. You need to handle your taxes on crowd funding correctly or you put yourself and your project at risk. I am not a tax professional and this is not official tax advice. It’s just the personal recommendations of a crowd-funding strategist. I highly recommend that you get an expert for your own tax situation in crowd funding.
Crowd donation projects: This is money given to a non-profit. These gifts are legitimate tax deductions for the person who gives. The organization receiving the money has to deal with this money, the way it deals with all income. This is the easiest area to work with because the rules have already been defined within the non-profit sector.
Crowd Financing projects: These are loans with interest being paid. You can treat that interest they way you would treat interest on the credit cards.
Crowd Equity projects: If you have received money this way, there should be advisors on the site to tell you exactly how to deal with it. It should be one of the criteria you used to choose the site. Do they have someone who will advise you on the tax consequences of your success (or failure) to raise money? This is the first question you should be asking every crowd equity site.
Regular old Crowd Funding- I recommend people declares it as income. Don’t fool around trying to hide the money. Don’t deny that you got the money. As the rules change, you could be liable for a whole lot more than you know. For most people who are using it to start a business, you will be using the money in your business and it won’t have a huge impact. Yes, you must pay some taxes. We all do. Don’t play around and put your self at risk.
For more information how crowd funding visit- www.acflife.com/strategies