united-states tax-law
Is crowd funded income used to pay legal fees taxable?
<p>I have a legal case that would impact a large number of people. I wish to raise money from them to appeal the case. If I do, will that be considered income for me if I provide it to the lawyer? Would it make a difference if I have the funds given directly to the lawyer? </p>

<p>First of all, the easy answer is that it is definitely income to the lawyer when received by the lawyer (or if put in a trust account as a retainer, when drawn from the trust account)</p>

<p>The hard point is whether it is income to you. Probably not. It is probably a gift to you and not income, because the person making the contribution is getting nothing in return. If it were really a large gift (over $14,000) it would force the person giving the gift to report it on a gift tax return (IRS Form 709) that they are required to complete, but it would still not be income to you and would also probably not be something you would have to fill out any tax forms to acknowledge.</p>

<p>In theory, any payment to a lawyer for legal services by someone engaged in business must be reported on a form 1099 no matter how large or small it is (also strictly speaking their problem), and that obligation on would be donors could be avoided if the money were sent to you instead of the lawyer, but sending it to the lawyer would increase the confidence of the donors that you are not diverting the funds for an improper purpose.</p>
