Thoughts on How to Book “GoFundMe” Expenses

One of my clients used their business checking account to pay $150 to a GoFundMe account. I was provided a receipt, which included a link to the GoFundMe (GFM) story. It turns out that funds were being raised to support a family who lost their home in a house fire. I can only assume my client’s client is related to this family.

My client clearly believes this expense is a valid business expense deduction. The client probably thinks it’s a deductible charitable contribution. But is it? Let’s look at some options for posting this expense.

Choosing the right general ledger account

Charitable contribution

GoFundMe contributions are rarely charitable contributions unless the fund requestor is a 501c3 (which, in this case, it is not). Posting the GFM expense to this account is not appropriate.

Marketing expense or sponsorship

An argument could be made that the GFM contribution is a justifiable expense for promoting the client’s business, similar to sponsoring a table for an awards banquet or buying an ad in an event catalog. However, in this case, it feels like a weak argument.

Employee morale

What if the GFM recipient is the family member of an employee? A strong case can be made that the GFM contribution would legitimately impact employee morale. However, in this particular case my client has no employees—the GFM was clearly to improve a client's morale.

Gifts

Gifts to clients are tax-deductible expenses, but they are limited to $25 per person per year. Since this gift was made to a third party on behalf of the client, not directly to the client, it seems to be a poor option as well.

Shareholder distribution or owner’s draw

After completing the above analysis, recording the GFM expense as a personal expense, in the form of a Shareholder Distribution or Owner’s Draw, feels like the right answer. This, of course, is a Balance Sheet account, not a P&L Expense account.

Getting it right with a collaborative approach

In situations like these, where the client requests something the bookkeeper deems questionable or inappropriate (but not unlawful), the best recourse is to bring the tax preparer into the conversation. Ask the CPA/EA/tax preparer for their input via email to receive a response in writing. Then, save the written response to .pdf for your own and the client’s files.

Note: You may need to ask the client for permission to contact the CPA, or you may already have carte blanche to reach out to the CPA proactively. Either way, copy the client on the correspondence so they never feel like you are going behind their back.

Finally, if you ever feel like the client IS doing something unlawful…that is a topic for a different article!