IRS Clarifies Form 1099-K Reporting Changes for Crowdfunding Payments

Wendy Walker
March 30, 2022

Editor’s note: This blog was updated on December 28, 2022

UpdateSince this content was published, the IRS released guidance that the implementation of the reduced $600 threshold for 1099-K reporting will be delayed until tax year 2023.  As a result, the federal threshold for the 1099-K form reporting for tax year 2022 will remain unchanged at $20,000 AND 200 transactions. Read our recent blog post for additional details on this federal change as well as state 1099-K reporting implications.

Last week, the IRS released a Fact Sheet alerting taxpayers that received money through “crowdfunding” that they may need to pay income taxes on that donated income. The clarifications were also aimed at payers of crowdfunding payments obligated to issue and file Form 1099-K Payment Card and Third Party Network Transactions for those donation payments.

Threshold change clarifications

For 2022 returns, the American Rescue Plan Act (ARP) changes the required reporting thresholds for Form 1099-K. Up until 2022, a third-party settlement organization (TPSO) was required to report Form 1099-K when the aggregate of payments paid to a payee in the calendar year was $20,000 and those payments were paid over 200 transactions. For 2022 returns and beyond, a TPSO must file Form 1099-K when the aggregate of payments paid to a payee in the calendar year is $600 and there is no transaction limit.

These changes align the Form 1099-K reporting thresholds with other 1099s that report nonemployee compensation income including Form 1099-NEC Nonemployee Compensation and Form 1099-MISC Miscellaneous Information.

Goods and services clarifications

ARP also changed the tax law to specifically state that Form 1099-K should only be issued for payments that represent goods and services income. Despite the reference to goods and services payments in other parts of the statute, the tax law previously did not specifically limit reporting to payments of goods and services. As a result, the IRS received erroneous Forms 1099-K from some payment processors, which created tax issues downstream for the taxpayer.

The Fact Sheet further clarifies that payments that represent nontaxable income are not includible in gross income for tax purposes. Therefore, payments that represent nontaxable income, such as charitable donations raised through crowdfunding platforms, should not be reported on Form 1099-K.

When are crowdfunding payments reportable on Form 1099-K?

Starting with returns filed for 2022, payment processors that facilitate crowdfunding payments are obligated to report Form 1099-K when they make distributions of crowdfunding amounts that aggregate to $600 or more and when the contributors to those campaigns received goods and/or services in exchange for their donations.

To be clear:

  1. Do not issue Form 1099-K to a recipient for crowdfunding payments that do not aggregate to at least $600 paid during the calendar year, AND,
  2. Do not issue Form 1099-K to a recipient for crowdfunding payments when contributors to the campaign do not expect to receive anything in return for their donation.

Who should receive Form 1099-K for crowdfunding payments?

Depending on the arrangement, donations collected from crowdfunding activities are sometimes paid to the organizer of the campaign. Other times, the donations are paid to the individual or business for which the donations were solicited.

The Fact Sheet is clear that the TPSO is required to issue Form 1099-K to the individual or business for which the donations were solicited when those donation payments are made directly to them (and then they meet the requirements described previously). Alternatively, if the amounts are paid over to the crowdfunding organizer, then Form 1099-K must be issued to the organizer instead.

When are crowdfunding payments not reportable on Form 1099-K?

The IRS pointed out that federal law taxes gross income from whatever source derived unless it is specifically excluded from gross income by law. When a donation is given through a crowdfunding campaign where the contributor does not expect anything in return, the item is generally treated as a gift and excludible from gross income and, therefore, not reportable.

Crowdfunding organizers must demonstrate donations were truly gifts

One of the most important details for a crowdfunding organizer to make note of is the last two sentences of the Fact Sheet, which discusses their obligations to keep records. The IRS generally audits taxpayers for up to three prior calendar years and that includes TPSOs required to issue and file Form 1099-K for payments they make related to crowdfunding activities.

It is critical to have detailed records of the campaign activities and all distributions of payments, including records of Forms 1099 issued or documentation explaining why Forms 1099 were not issued, in the event of an IRS audit.

Take Action

Ready to learn more about Sovos’ services? Talk to one of our experts to see how we can help.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.


Wendy Walker

Wendy Walker is the principal of Tax Information Reporting solutions at Sovos. She has more than 15 years of tax operations management and tax compliance experience with emphasis in large financial institutions, having held positions with CTI Technologies (a division of IHS Markit), Zions Bancorporation and JP Morgan Chase. Wendy has served as a member of several prominent industry advisory boards. She graduated with a BS in Process Engineering from Franklin University and earned her MBA from Ohio Dominican University, in Columbus, Ohio.
Share this post

November 29, 2023
Taxation of Motor Insurance Policies: Spain

There is a wide variety of indirect taxes and parafiscal charges that apply to the different elements of coverage that can be included under a motor insurance policy in Spain. You can read our blog to learn more about taxation of motor insurance policies in Europe, this blog focuses on some of the specifics to […]

North America ShipCompliant
November 28, 2023
How the Beverage Alcohol Industry Prioritizes DEI Initiatives

Diversity, equity and inclusion (DEI) initiatives have quickly become staples for numerous businesses across industries. The beverage alcohol industry is also demonstrating that these efforts are as core to their company successes as lobbying and member education. We’ve gathered a handful of examples of DEI programs that our partners have implemented, showcasing how ensuring a […]

North America Tax Information Reporting
November 22, 2023
IRS: Form 1099-K Reporting Threshold Change Delayed Again

The IRS recently announced a delay of the new $600 Form 1099-K reporting threshold for third-party settlement organizations (TPSOs) for calendar year 2023. Instead, 2023 will be an additional transition year, with reporting not required unless a taxpayer receives over $20,000 and has more than 200 transactions in 2023. “We spent many months gathering feedback […]

VAT & Fiscal Reporting
November 21, 2023
Import One Stop Shop Expanded Under ‘ViDA,’ ‘Customs Reforms’ Packages

In the last year, the European Commission has put forward two proposals, the “VAT in the Digital Age” and the “EU Customs Reform,” which could significantly expand the scope of the Import One Stop Shop over the next several years. What is the Import One Stop Shop? The Import One Stop Shop (IOSS) is a special […]

VAT & Fiscal Reporting
November 20, 2023
VAT in the Digital Age (ViDA) Potentially Delayed

In 2022, the European Commission published its “VAT in the Digital Age” initiative (ViDA), which would make widespread changes to current VAT rules under Council Directive 2006/112/EC (the EU VAT Directive). The Commission proposed an ambitious timeline for ViDA, with the first changes to take effect in January 2025. As with any amendment to the […]