Tax Challenges in Charitable Crowdfunding and Mutual Aid

Have you ever received some money through a GoFundMe campaign or Venmo or CashApp transfers after a medical emergency, natural disaster or other crisis?

If so, you may have also gotten an unwelcome surprise: a federal tax form that treats what you got as a gift as if it were earned income. And receiving this form can also affect your state tax return.

We are researchers at Indiana University’s Lilly Family School of Philanthropy. Together, we study how the tax system treats charitable crowdfunding – and sometimes harms people who get help that way.

Also known as monetary mutual aid, charitable crowdfunding refers to need-based gifts that one person gives another.

It may sound simple, but many practical issues arise when reporting rules designed for commercial transactions inadvertently treat these transfers as taxable income.

We have analyzed Internal Revenue Service reporting rules, federal case law and community-based mutual aid practices to better understand how tax policies can affect people who get money directly from others, given to them as charity.

In the cases we examined, recipients were not selling goods or services. Yet payment platforms frequently issued tax forms to the recipients without distinguishing between payments tied to earned income and money received as crisis-related support.

Through mutual aid, people can help meet the needs of others, typically outside formal nonprofit or government systems – meaning that such giving tends to bypass established charities. It tends to be community-driven and often emerges when institutional support is delayed, insufficient or inaccessible.

During the COVID-19 pandemic and subsequent disasters, mutual aid surged. For example, studies indicate that at the start of the pandemic, approximately 50 documented mutual aid groups existed across the United States.

By May 2020, that number had grown to over 800, with networks established in nearly every U.S. state.

These groups provided food, rental assistance, medical supplies and direct cash support when formal systems, such as government programs and nonprofit agencies, faltered.

Research from the Lilly Family School of Philanthropy’s Women’s Philanthropy Institute found that during the first year of the pandemic, most Americans who gave money did not donate primarily to official charities. Instead, they gave directly to people in need or to informal groups using crowdfunding platforms, such as GoFundMe, and money-transfer apps like Venmo and CashApp.

We’ve found that the tax code has not kept pace with the rapid growth of digitally mediated, peer-to-peer giving on a large scale.

Crowdfunding platforms now facilitate billions of dollars in transfers each year, and peer-to-peer payment apps process hundreds of billions more in transactions. Unfortunately, reporting rules originally designed to detect business income are increasingly applied to individuals who receive crisis-related financial support.

Due to changes to federal tax reporting rules that Congress approved in 2021, payment platforms, including Venmo, CashApp, PayPal and any other platforms used for transacting funds, had to issue 1099-K forms to any Americans who received more than US$600 in payments. The 1099-K is a tax document that reports payments a person receives through third-party platforms to the IRS.

Lawmakers made this change to improve tax compliance in the gig economy – by making sure that Americans were paying taxes on the taxable income they earn by driving for Lyft, walking dogs and doing other kinds of side hustles.

Congress has since reversed course.

A provision in the large tax-reform-and-spending package that President Donald Trump signed into law on July 4, 2025, restored the federal 1099-K reporting threshold for payment apps like Venmo to the prior standard: over $20,000 in gross payments and more than 200 transactions.

While this change is likely to make a difference, especially since it’s retroactive to 2021, confusion persists.

For one thing, people can still receive tax forms in some states, including Maryland, Massachusetts, Vermont and Virginia, that have continued to require that people getting less than $20,000 be issued 1099-K forms.

There are still cases where mutual aid recipients may have to document that the money they’ve gotten from people trying to help them was a gift, not earned income.

And when someone gets very ill or their house burns down, legitimate fundraising through mutal monetary aid can exceed $20,000.

For example, roughly 250,000 campaigns are created each year on GoFundMe for medical costs; studies have found that campaigns related to cancer seek $20,000 in gifts on average.

Following the 2025 Los Angeles wildfires, the median amount that vetted, individual fundraisers raised through GoFundMe topped $25,000 , with several instances where they brought in hundreds of thousands of dollars.

If someone receives a 1099-K for funds that were provided as gifts rather than payments, tax experts generally recommend keeping clear documentation of the transfers and consulting a tax professional about how to properly report the amount so it is not treated as taxable income.

Mutual aid isn’t gig work, so the tax code shouldn’t treat them the same. Getting multiple $50 gifts through a GoFundMe campaign to help you contend with a crisis brought on by your husband’s stroke is not the same as earning the equivalent driving for Uber.

The Internal Revenue Code excludes gifts from your taxable income, although the person donating needs to pay taxes if they give someone more than a certain amount – currently $19,000 per year.

But U.S. courts have historically interpreted what constitutes a gift narrowly. In a 1960 U.S. Supreme Court case, an opinion from a seven-justice majority defined gifts as arising from “detached and disinterested generosity.”

That standard works when your uncle cuts you a birthday check. But it’s not a good fit for today’s collective, need-based giving that’s often coordinated through online platforms and often involves the transfer of funds among people who have never met.

Research shows that mutual aid disproportionately supports low-income households, undocumented families, people with disabilities and communities of color. These same groups are more likely to face heightened scrutiny from financial platforms and tax authorities, and are less likely to have access to tax or legal assistance.

In examining tax enforcement research alongside our findings, we found evidence that expanded reporting requirements may have amplified existing racial and economic inequities. And there could be serious consequences for the recipients of monetary mutual aid. Simply receiving a tax form can jeopardize their eligibility for some government benefits because it may suggest to the authorities that someone’s income is too high to need them.

Without clearer guidance, people who are already facing a crisis may be penalized for receiving help. Research on informal giving suggests that when reporting rules are unclear, individual donors may become more hesitant to send money directly to someone who needs it.

As charitable crowdfunding continues to grow, the issue is not only how platforms such as Venmo or GoFundMe report transactions. Clearer guidance from the IRS about how need-based, noncommercial transfers should be treated could reduce the risk that emergency support is mischaracterized as income.