Crowdfunding platforms like Kickstarter and IndieGoGo have made it easier than ever before to raise money online, but some are concerned these companies lack regulation and clarity. These sites help fund a wide variety of projects, helping people with big ideas get in touch with potential investors.
The question is: Should pledges by investors be treated as gifts or as standard taxable income? The IRS and the SEC have been slow to clarify and propose crowdfunding regulations.
In the meantime, Kickstarter advises aspiring projects to seek the advice of a tax accountant.
Crowdfunding can be based on either rewards or equity.
Equity-based crowdfunding, where investors receive equity in return for micro-investments, has even less policy clarity than the taxation of rewards-based crowdfunding.
Nat Rudarakanchana, the International Business Times money reporter, wrote about the topic for IBT magazine and stopped by to tell us more.