2016-12-11 00:00:00 Funding and Financing English Review how the Canada Revenue Agency treats crowdfunding. Learn when you have to report crowdfunding as income and how to avoid that... https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/03/A-Small-Business-Owner-Reviewing-Crowdfunded-Finances-On-Computer.jpg https://quickbooks.intuit.com/ca/resources/funding-financing/keep-track-of-crowdfunded-finances/ Keep Track of Crowdfunded Finances

Keep Track of Crowdfunded Finances

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If you use crowdfunding to gather startup financing for your business, you must report the payments as business revenue on your tax return. (This rule doesn’t apply to nonprofits or charitable fundraisers, however.) Ideally, so you don’t overlook any payments, you should implement a tracking system such as noting the payments in your accounting software upon receipt.

If you offer gifts to your donors, you may write off the related costs as business expenses. For example, if you receive $10,000 from crowdfunding but spend $1,000 on thank-you gifts, you should only report $9,000 in income.

If you want to use crowdfunding as startup financing, consider using equity crowdfunding. In this case, you don’t have to report the funds as income – they are classified as capital, and your shareholders pay tax later on dividends and distributions.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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