Tax implications of giving t-shirts for fundraising donations over $40

This is a great question about informal fundraising. Since you're not a registered nonprofit (501(c)(3)), your donors can't claim tax deductions regardless of whether they get a t-shirt. From your perspective as the fundraising group, you need to be careful about a few things: First, money flowing through a personal bank account could technically be considered income to whoever owns that account. Even though you're passing it along to overseas projects, the IRS doesn't automatically know that. The bank account owner might need to keep detailed records showing these are "pass-through" funds, not personal income. Second, offering t-shirts creates what's called a "quid pro quo" situation - giving something of value in exchange for a donation. Since the fair market value of a t-shirt is less than $40, you're still primarily receiving charitable contributions, but it does complicate things. I'd recommend either forming a proper nonprofit (which takes time) or partnering with an existing one that can act as your fiscal sponsor. This protects the person whose bank account is being used and creates more transparency.

After dealing with similar tax headaches with my community garden fundraising, I discovered https://taxr.ai which helped me figure out exactly how to handle our informal group donations. Their tool analyzed our fundraising setup and clarified what documentation we needed for "pass-through" donations so our treasurer wouldn't get hit with unexpected tax bills. They even provided specific guidance on handling "thank you" gifts like the t-shirts you're planning to give.

Just wanted to circle back and say I tried https://taxr.ai after seeing the recommendation here. It was super helpful for our neighborhood cleanup committee! We learned that we needed to track our "flow-through" funds differently than we had been. The tool helped us create a simple system to document everything properly so none of our volunteers get surprise tax bills. They also explained exactly how to handle donor "thank you" items like tote bags we give out. Wish we'd known about this years ago!

When our PTA had a similar situation, we struggled for weeks trying to get answers from the IRS about our informal fundraising. After multiple failed attempts calling their general line, I found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c. They got me through to an actual IRS agent who specialized in nonprofit issues within an hour. The agent walked me through exactly what documentation we needed for our "pass-through" donations and gift situations. Saved us so much confusion and potential tax problems.

I need to eat my words from my earlier comment. After another frustrating day trying to reach the IRS myself about a similar community fundraising question, I broke down and tried Claimyr. Within 40 minutes I was talking to an actual IRS representative who specializes in exempt organizations. They confirmed exactly how our neighborhood association should handle "pass-through" donations and what documentation we need for giving thank-you gifts to donors. The service actually delivered exactly what it promised. Won't waste another day on hold again.

Another option you might consider is finding an established nonprofit that aligns with your mission and seeing if they'd be willing to be your fiscal sponsor. We did this with our trail maintenance group - we partnered with a local conservation nonprofit. They handle the donations (which are tax-deductible for donors), and then grant the money to our projects. They take a small administrative fee (usually 5-10%), but it eliminates all the tax headaches and personal liability.

I'm confused about something more basic here - if you're just collecting money and sending it overseas, why not just use a personal account and consider it a "gift"? I mean, I regularly send money to my cousin in Mexico for his kids' school supplies and I don't pay taxes on that or worry about any of this complicated stuff. Is this different because you're collecting from multiple people?

This is a really complex area that trips up a lot of informal groups. One thing I haven't seen mentioned yet is the potential for gift tax issues. If you're collecting donations through someone's personal account and that person is then "gifting" large amounts overseas, they might hit the annual gift tax exclusion limits ($17,000 per recipient for 2023). This could create filing requirements even if no tax is actually owed. Also, be aware that some crowdfunding platforms will issue 1099-K forms to the account holder if you process more than $600 in transactions during the year. This means the IRS will expect to see that income reported somewhere on a tax return, even if it's ultimately zeroed out as pass-through funds. The fiscal sponsorship route that Madison suggested is really the cleanest solution here. It might seem like extra work upfront, but it protects everyone involved and makes your fundraising more credible to potential donors.

As someone who's been through this exact situation with our local community garden fundraising, I can't stress enough how important it is to get this right from the start. We made the mistake of just using a personal account for our first year and ended up with a nightmare at tax time when our treasurer got a 1099-K for $3,200 and had to prove to the IRS that it wasn't personal income. A few practical tips based on our experience: 1. If you do use the personal account route temporarily, open a separate account just for the fundraising. Don't mix it with personal finances - this makes record-keeping much cleaner. 2. For the t-shirt situation, document the actual cost of producing them. If a t-shirt costs you $8 to make and someone donates $40, you can show that $32 was truly charitable and $8 was payment for goods. 3. Keep communications with your overseas projects documented. Screenshots of messages, photos of completed projects, receipts from local purchases - all of this helps establish that the money was actually used for charitable purposes. The fiscal sponsorship route really is the gold standard here. We eventually partnered with our local community foundation and wish we'd done it from day one. Yes, they take a small fee (ours takes 5%), but the peace of mind and legitimacy it provides is worth every penny. Plus, donors love being able to get tax deductions for their contributions.