2018-02-02T14:13:57+00:00By |

There are some popular 3rd party platforms online, making it fast and easy to raise funds for causes.

Here is a brief overview of a few things to consider when thinking of using an online funding site, for a personal need or charity, often commonly called “peer to peer” fundraising. We are a very mobile society and sometimes physical distance is a blockade to being able to help a friend or relative. Also with the popularity of online banking, and a check book is a thing of the past, even charities depend on the web to collect funds. Online peer-to-peer services allow for a way to help that is very effective.

However, the donor needs to understand that all platforms are not the same. Peer-toPeer (Third party and herein referred to as P2P) platforms. There are an endless number of services available. Let’s start with two popular ones: Go Fund Me, (www.gofundme.com), and Give Forward (www.giveforward.com). These services are fast, easy and can be ready to go in just minutes. All you need is a bank account (not necessarily your own), a story, a few pictures and a funding goal. The cause can be for anything you can imagine. Wish to have your friends donate for a honeymoon instead of buying wedding gifts? Easy, just go on one of the many available sites, set it up and blast it to your peeps and hope they give via the site the $25 that they might have used to buy you a toaster! Or it could be used for more serious needs, like medical expenses.

I have personally suggested third party platforms to help fill a sudden need to newly diagnosed patient facing a large deductible or the possibility of needing travel funds for non-local or specialty care.   When in need, a P2P platform can be just the ticket to get cash in hand, allow friends and family an easy way to chip in. Sounds too good to be true? No, but there are somethings to consider. It is really free? No, but It is free to set up, but there are some small usage fees. Each transaction has a small handling fee, much like a traditional credit card transaction online. The fees cover the services of the platform. This is how it works. You have a need and a goal. You set up a page stating your need, post a few pictures and you have to give a bank account number for the donations to be deposited.

For the first few days, (time depends on service used) the funds are held at the service, then after set up, deposits are made in real time into the account, minus a small credit card processing fee. Again, the fees are not usually high, and the convenient factor can far outweigh way the cost. So what are the drawbacks? Well, there are a few things to think about. Anyone can set up an account. P2P fundraising is based off the honor system. There is not a qualifying system in peer to peer.   Also one other thing to consider is if your goal is a large one, the IRS might contact you and want their percentage as taxable income. So if you are the one setting up an account, you might need to seek professional financial advice first. Also donations to peer to peer are not tax deductible, as you are not donating to a charity but to an individual.

Remember I mentioned a qualifying system in P2P? GoFundme has recently partnered with FirstGiving adding a “Certified Charity campaign” that are guaranteed to be tax-deductible as those campaigns are limited to approved charities.  General P2P platforms do not have a way of qualifying a cause but there are P2P sites that are only allowed to be used by an IRS approved charity. One example is FirstGiving (www.firstgiving.com). What makes FirstGiving different from general P2P is Firstgiving only allows 501(c)(3) charities to use their services, giving a level of qualification to the appeal.   The charity has to register with the site, giving proof of their IRS status. Of course a charity can use their own charity site to collect online donations. Since I have outlined some of the differences you might wonder why would a charity use a service like Firstgiving?

Well, there are some social aspects that come into play.   Let’s use the American Red Cross for example. They are a well-known charity, with the ability to collect donations on their site. However, if I want to have some ownership in a project or need, I could go to the American Red Cross site on Firstgiving, (www.firstgiving.com/AmericanRedCross) citing a personal example of why I would like to see my friends join them in support. I could set a small (or large) goal and go for it. The donations are tax deductible and the funds are placed directly to the charity bank account. A page like Firstgiving can give the driver of the cause a voice to share why this is cause is important to them.

Another feature is potential donors can see the mission statement of the charity, address and contact details and even a direct link to donate to that charity, allowing you to bypass the Firstgiving site all together. This ability only adds to the trust factor of the site. A page on any of the websites I am discussing all have a meter feature, allowing excitement to grow as the meter hopefully moves to the goal. This excitement factor is powerful reason a charity might use Firstgiving in addition to or even instead of their own website for a campaign. All donations are tax-deductible. That is an important feature if you are planning to use this deduction on your taxes or wish to have your employer match your donation.

I personally donate to P2P sites, as well as Firstgiving and also directly to my favorite charities. I think P2P online fundraising is a great service. For an individual or for a charity, there is a place and time for each. I hope this information will be of help to you as you make donation decisions.

Happy donating!

Terry Lynn Arnold