What is Kickstarter?
Kickstarter is a funding platform for creative projects. Everything from film, games, and music to art, design, and technology. Kickstarter is full of ambitious, innovative, and imaginative projects that are brought to life through the direct support of others.
How does it work?
Every project creator sets their project's funding goal and deadline. If people like the project, they can pledge money to make it happen. If the project succeeds in reaching its funding goal, all backers' credit cards are charged when time expires. Funding on Kickstarter is all-or-nothing. If the project falls short of its funding goal, no one is charged.
If a project is successfully funded, Kickstarter applies a 5% fee to the funds collected.
Why do people support projects on Kickstarter, and what do they get in return?
Backers pledge money for different reasons. Some backers are rallying around their friends' projects. Some are supporting people they've long admired. Many are just inspired by a new idea. Others are inspired by a project's rewards — a copy of what's being made, a limited edition, or a custom experience related to the project.
Project creators keep 100% ownership of their work. And Kickstarter cannot be used to offer financial returns or equity, or to solicit loans. Some projects that are funded on Kickstarter may go on to make money, but backers are supporting projects to help them come to life, not financially profit.
You can learn more about Kickstarter and how it works in our FAQ.
How do taxes work on Kickstarter?
We can’t give tax advice, but we have compiled this guide for US-based financial professionals who may not be familiar with Kickstarter. This information is not intended to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding tax-related penalties under the US Internal Revenue Code or (2) promoting, marketing, or recommending to another party any tax-related matters. This information is just a start.
In general, in the US, funds raised on Kickstarter are considered income.
In general, a creator can offset the income from their Kickstarter project with deductible expenses that are related to the project and accounted for in the same tax year. For example, if a creator receives $1,000 in funding and spends $1,000 on their project in the same tax year, then their expenses could fully offset their Kickstarter funding for federal income tax purposes. If a creator receives funding in one year and spends money on their project in a later year, consider whether their expenses can still offset their Kickstarter funding using the accrual method of accounting.
Creators who have passed over the thresholds established by the IRS (currently $20,000 in gross volume per year and 200 or more transactions) will receive a form 1099-K from our payment processor, Stripe, in January following the year in which their project was successfully funded.
Beyond deductions, a creator may be able to classify certain funds raised on Kickstarter as a nontaxable gift, and not income. A gift is something given out of “detached and disinterested generosity” for personal reasons and without the expectation of getting something in return.
Sales tax may also be applicable in certain cases depending on the local rules. In general, sales tax applies only if the creator has sufficient connection to the location of the backer.
For project creators outside the US, please refer to your local tax authorities:
- United Kingdom: https://www.hmrc.gov.uk
- Canada: http://www.cra-arc.gc.ca
- Australia: https://www.ato.gov.au
- New Zealand: http://www.ird.govt.nz
- Netherlands: http://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/prive/
- Ireland: http://www.revenue.ie
- Denmark: http://www.skat.dk
- Sweden: http://www.skatteverket.se
- Norway: http://www.skatteetaten.no
- Germany: http://www.bzst.de/DE/Home/home_node.html
- France: http://www.impots.gouv.fr/portal/static/
- Spain: http://www.agenciatributaria.es/AEAT.internet/Inicio.shtml
- Italy: http://www.agenziaentrate.gov.it/wps/portal/entrate/home
- Austria: https://www.bmf.gv.at/
- Belgium: http://financien.belgium.be/nl/
- Luxembourg: http://www.impotsdirects.public.lu/
- Switzerland: http://www.estv.admin.ch/
- Singapore: https://www.iras.gov.sg/irashome/default.aspx
- Hong Kong: http://www.ird.gov.hk/index.htm
- Mexico: http://www.sat.gob.mx/Paginas/Inicio.aspx
- Japan: https://www.nta.go.jp/
What is the 1099-K Form?
Every year, the United States IRS requires that Stripe (our Payments Processor) provide a form called a 1099-K for each Stripe account that meets all of the following criteria in the previous calendar year:
- Project creator bank account is based in the United States AND
- More than $20,000 USD in total gross volume AND
- More than 200 charges
The 1099-K is a purely informational form that summarizes the sales activity of your account and is designed to assist you in reporting your taxes. It is provided to you and the IRS, as well as some US states.
States with lower threshold requirements
Massachusetts, Mississippi, and Vermont require 1099-Ks to be filed for each unique tax identification number with at least $600 USD in gross volume.
Missouri requires 1099-Ks to be filed for each unique tax identification number with at least $1,200 USD in gross volume.
If you processed $20K and 200 transactions or less and still received a 1099-K Form
Stripe provides a 1099-K form for each unique tax identification number (TIN), such as a Social Security Number (SSN) or Employer Identification Number (EIN), that meets the IRS processing threshold. If you received a 1099-K and didn't expect to, it might be because:
- You have two or more accounts with the same TIN; one meets the IRS threshold and one does not. Each will receive a 1099-K.
- You have two or more accounts with the same TIN; neither are over the IRS threshold individually but, when combined, the threshold is met. Each will receive a 1099-K.
- Your business is based in Massachusetts, Mississippi, Missouri, or Vermont.