Peter Strzok, the longtime FBI agent and former Russia investigation honcho whose anti-Trump text messages turned him into a political flashpoint this year, was finally fired from the FBI this week. Like Andrew McCabe before him, Strzok insists his firing was politically motivated and inappropriate. And like McCabe, Strzok is cashing in on his newfound martyr status through the magic of crowdfunding—a GoFundMe page created in his name Monday to defray “legal costs and lost income” has already blown by its initial goal of $150,000, and now sits, at time of this writing, at nearly $420,000. (The page’s owners have since helpfully raised the fundraising goal to $500,000, lest any #Resistance troopers be prevented from wasting their money to spite the president.)
Yet even as the money pours in for Strzok to take the fight to the Trump administration, he may be compelled to hand a chunk over to the government before the fight even gets started—35 percent of it, to be precise. That’s because the IRS generally counts GoFundMe donations as net income on a person’s tax returns—and a $500,000 bump is certainly enough to knock even a well-off former FBI standout up a tax bracket or two.
In fact, the IRS’s rules on money raised through crowdfunding are pretty nebulous, according to tax attorney Joshua Wu.
“Generally speaking, the way the law works is income from whatever source derived is considered taxable income. … In instances where people are raising money for charitable purposes through an exempt organization, that can be tax free to the recipient. But on the other hand, for people who are raising money for building a new product, or starting a business, or funding some kind of personal endeavor, the general principle is that is taxable.”
On its face, this principle would seem to apply directly to Strzok’s plea for supplementary income. But Wu also points out a potential exception: If the donations are designated as a gift of “pure generosity,” Strzok may be able to pocket the balance. A 2016 IRS information letter designates such fundraising gifts as money donated “out of affection, respect, admiration, charity, or like impulses,” and not from “any moral or legal duty or from the incentive of anticipated benefit.” Strzok could thus potentially argue to the IRS that crowdfunders donated out of just such a sense of admiration and respect.
Yet there’s a further complication: To dodge the tax, Strzok would have to be able to demonstrate that thousands of anonymous donors truly donated out of such purely detached generosity.
“It’s a gray area, because what the IRS guidance says is, look, if it’s detached generosity, no quid pro quo, it can be a non-taxable gift,” Wu says. “But the guidance specifically says a voluntary transfer without a quid pro quo is not necessarily a gift. In other words, it’s still taxable. So that’s why what we’re looking at here sounds like it falls right in that central lane.”
