Many people have turned to online platforms like GoFundMe, Venmo, and CashApp to offer financial support during times of crisis. However, recipients of these funds may receive a 1099-K tax form, treating the money as earned income rather than a gift.
A failure to make a needed distinction
This issue centers around what is known as monetary mutual aid – need-based gifts from one person to another. Researchers at Indiana University’s Lilly Family School of Philanthropy are studying how the tax system impacts charitable crowdfunding and those who receive aid through it.
Payment platforms frequently issue tax forms without differentiating between payments for goods or services and crisis-related support, even when recipients are not selling anything. The IRS reporting rules, federal case law, and community-based mutual aid practices have been analyzed to understand the impact of tax policies on those receiving charitable funds.
Mutual aid has grown
Mutual aid involves people directly meeting the needs of others, often outside of traditional nonprofit or government systems. During the COVID-19 pandemic, mutual aid surged, growing from approximately 50 documented groups in the United States at the start of the pandemic to over 800 by May 2020.
These groups provided essential support like food, rental assistance, and medical supplies when formal systems faltered. Research indicates that during the first year of the pandemic, most Americans donated directly to people in need or informal groups via crowdfunding platforms rather than established charities.
Tax law hasn’t kept up
The tax code has not kept pace with the growth of peer-to-peer giving. Crowdfunding platforms and payment apps now process billions of dollars in transactions annually. Changes to federal tax reporting rules in 2021 required platforms to issue 1099-K forms to anyone receiving over $600 in payments.
This change was intended to improve tax compliance in the gig economy. However, Congress has since reversed course, restoring the reporting threshold to over $20,000 in gross payments and more than 200 transactions through a tax-reform-and-spending package signed into law on July 4, 2025.
An incomplete fix
While the change to the reporting threshold is likely to make a difference, confusion persists. Some states, including Maryland, Massachusetts, Vermont, and Virginia, continue to require 1099-K forms for payments under $20,000. Recipients of mutual aid may still need to document that funds received were gifts, not earned income.
Fundraising efforts following the 2025 Los Angeles wildfires, for example, often exceeded $25,000. If someone receives a 1099-K for funds provided as gifts, tax experts recommend keeping documentation and consulting a tax professional.
IRS doesn’t gain mutual aid
Mutual aid is distinct from gig perform, and the tax code should reflect this. Receiving multiple $50 gifts through a GoFundMe campaign to help with a crisis is different than earning income through a platform like Uber. The Internal Revenue Code excludes gifts from taxable income, though donors may face taxes on gifts exceeding $19,000 per year.
However, U.S. Courts have historically interpreted “gift” narrowly, which doesn’t align with today’s collective, need-based giving coordinated through online platforms. Research shows that mutual aid disproportionately supports low-income households, undocumented families, people with disabilities, and communities of color, groups who may face heightened scrutiny from tax authorities.
Frequently Asked Questions
What is monetary mutual aid?
Monetary mutual aid refers to need-based gifts that one person gives to another.
What is a 1099-K form?
A 1099-K is a tax document that reports payments a person receives through third-party platforms to the IRS.
What changed regarding the 1099-K reporting threshold?
A provision in a tax-reform-and-spending package signed into law on July 4, 2025, restored the federal 1099-K reporting threshold to over $20,000 in gross payments and more than 200 transactions.
How might evolving tax regulations impact the future of charitable giving and support networks?
