How an IRS Bank Levy Turned a Go Fund Me Campaign Into a Nightmare
We get questions all the time about complex tax problems. Lately we have been hearing more about crowdfunding and the unexpected tax consequences that can arise when funds are disbursed. In an August 3rd article by Jeff Mathews, CPA, we covered some of the main crowdfunding tax issues. This week we encountered a new dilemma that may not be as uncommon as we think. Setting up accounts correctly from the start can prevent the event described below before it is too late.
TaxBuzz Question: A client of mine recently became an amputee. A friend of his set up a Go Fund Me account to raise funds for the prosthetics and related medical costs. The friend had the funds, upward of $17,000, put into his own personal checking account instead of an account in my client’s name. Well, the friend had back tax issues and the IRS levied the entire account. Gone. The obvious question is about recourse to see if the funds can be returned. My client contacted Go Fund Me to see if there was anything they could do. Maybe with proof of recipient it could be overturned. I was wondering if there is any precedent for getting a levied account reversed in this type of case. Thoughts?
One of our IRS tax problem experts chimes in…
TaxBuzz verified professional Sharon Morgan, EA, CTRS, offered the following response:
Sharon Morgan added the following alternative…
The Go Fund Me organizer may still be able to get a reversal of the levy and the funds sent back to him. He may qualify for currently not collectible status and ride out the statute clock.
Taxes and compliance are complicated issues. Making financial decisions without proper advice can be costly. Hopefully this story turns out with a happy ending. Perhaps a new campaign can be set up with Go Fund Me if the IRS response is negative.