Article | 1:35 min read

Think Before You Participate in Crowdsourcing

Budget and Save

We live in a sharing economy. We share rides, we share our homes, and we even share our bills. That’s how crowdsourcing sites work. There are plenty of companies that serve as a platform for others to use to spread a message and raise money for themselves or someone else. You’ve likely seen this on social media at some point, whether they’re raising money for a sick dog’s surgery or a family in need, these well-meaning campaigns pop up everywhere and every day.

A person using credit card online

While the campaigns may tug at your heartstrings and are most likely completely worthy causes, you should consider a couple of things before you get out your credit card.

Your donation could end up hurting the recipient
The rules on these websites are a little hazy, but when you donate, you might actually end up doing damage in the long run to the recipient or the person who created the fundraiser. The money received may be recognized as income, and that means several things. They could have to pay income tax on the money they receive, which can be extremely expensive. It also might mean that, if they were relying on federal services like Medicaid, food stamps, etc., they may no longer be able to receive them because these are income-based benefits.

Your donation might not be tax deductible
Normally, you can count charitable donations as a tax deduction, but only if it's an organization deemed qualified by the IRS. You should check the crowdsourcing site's terms or FAQ page, because many of them cannot guarantee that you'll be able to benefit from your donation. Maybe, instead of donating on the crowdsourcing website, you could find a charity to donate to that would accomplish the same goal. That way, the donor and the cause can mutually benefit.

Beware of scams
Before you decide to donate, make sure you research the cause and the organizer. Unfortunately, some people decide to take advantage of other's emotions. If you have suspicions that a campaign is fraudulent, you should contact the site's customer service and ask. You might be saving someone else the regret of getting caught in a scam.

It's easy to get caught up in these campaigns and feel the need to donate. However, like any decision, you need to take into consideration all of the possible outcomes. Make sure your making informed choices when you are being charitable.


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