Tax Information
Understanding the tax implications of CloakedCare
Important Disclaimer
This page provides general information about tax considerations when using CloakedCare. This is not tax advice. Tax laws are complex and vary by jurisdiction. We strongly recommend consulting with a qualified tax professional regarding your specific situation.
The CloakedCare Difference
CloakedCare is the only crowdfunding platform where recipients never receive money directly. Instead, after donors fund a bill, CloakedCare processes payment directly to merchants on behalf of the bill poster—whether that's a utility company, medical provider, or other service provider.
Like other personal crowdfunding platforms such as donation-based websites, donations on CloakedCare are considered personal gifts and are generally not taxable income. However, CloakedCare's unique merchant-direct payment model provides benefits that go far beyond tax considerations.
Why This Matters:
By paying merchants directly, CloakedCare ensures funds are used for their intended purpose, provides donors with confidence their contribution makes the exact impact they intended, and protects recipients from the complexity and pressure of managing fundraising proceeds.
How CloakedCare Works Differently
The Payment Flow
Traditional Platforms (Donation-Based Websites)
- •Funds deposited into recipient's bank account
- •Recipient has full control over funds
- •Recipient must pay bills themselves
- •No guarantee funds go to intended purpose
CloakedCare
- ✓CloakedCare handles payment directly to merchant on behalf of recipient
- ✓Recipient never touches the funds
- ✓Bill paid promptly
- ✓100% guaranteed to reach intended purpose
Tax Treatment: Both Are Gift-Based
Both CloakedCare and donation-based platforms operate on a gift-based model, meaning donations are generally considered personal gifts and are not taxable income to recipients. However, CloakedCare's merchant-direct payment model provides unique advantages:
For Recipients
- •No bank account required
- •Protected from potential merchant issues
- •No temptation to use funds for other purposes
- •Prompt bill resolution without manual payment
For Donors
- •Complete confidence funds reach intended bill
- •No concern about fund misuse
- •Direct impact verification
- •Peace of mind through transparent payment
Consult a Tax Professional
While both gift-based crowdfunding models are generally structured to minimize tax implications, individual tax situations vary. We strongly recommend consulting a qualified tax professional or CPA familiar with your specific circumstances for personalized advice.
For Donors
Tax Deductibility
Important Notice
Donations to CloakedCare are currently NOT tax-deductible because CloakedCare is not a registered 501(c)(3) nonprofit organization.
Under current U.S. tax law:
- • Donations must go to qualified 501(c)(3) organizations to be deductible
- • Person-to-person gifts are generally not deductible
- • CloakedCare donations are considered gifts to individuals
- • You will not receive a tax deduction for your contributions
Gift Tax Considerations
For most donors, gift tax is not a concern:
- • The annual gift tax exclusion is $18,000 per recipient (2024)
- • Most donors won't exceed this amount per bill poster
- • Even if you exceed it, you likely won't owe taxes due to the lifetime exemption ($13.61 million in 2024)
- • You would only need to file a gift tax return (Form 709) if donating over $18,000 to one person in a year
In practice: Unless you're making very large donations to single individuals, gift tax is typically not an issue.
Donor Record Keeping
Even though donations aren't tax-deductible, we recommend keeping records:
What to Keep
- • Donation receipts
- • Email confirmations
- • Payment records
- • Bill details
Why Keep Records
- • Track your giving
- • Personal budgeting
- • Future reference
- • Dispute resolution
CloakedCare Provides
- • Instant email receipts
- • Dashboard history
- • Contribution tracking
- • Annual summaries
Platform Comparison
| Feature | CloakedCare | Donation-Based Websites |
|---|---|---|
| Recipient Receives Funds | No | Yes |
| Payment Method | Direct to merchant | To recipient's bank |
| Taxable Income (Gift-Based) | Generally No | Generally No |
| Funds Guaranteed to Pay Bill | Yes | No |
| Bank Account Required | No | Yes |
| Donor Confidence in Fund Use | 100% Verified | Trust-based |
| Donor Tax Deduction | No | No |
Key Distinction: CloakedCare is the only platform where recipients never receive the money directly. Once bills are funded, CloakedCare processes all payments directly to merchants on the recipient's behalf.
Why Creditor-Direct Payment Matters
CloakedCare's revolutionary payment model isn't just about taxes—it's about creating a safer, more transparent, and more effective way to help people in need.
For Recipients
- No financial intermediary stress: Bills are paid promptly without you managing funds
- Access without banking: No bank account required to receive help
- Protection from misuse pressure: Removes temptation or pressure to use funds for other needs
- Fast relief: Bills are resolved promptly once funding completes
For Donors
- Guaranteed impact: Your donation pays the exact bill you chose to help with
- Complete transparency: You know exactly where every dollar goes
- Peace of mind: No concerns about fund mismanagement
- Direct verification: See the real-world impact of your generosity
The Bottom Line
While both CloakedCare and donation-based platforms are gift-based and generally don't create tax obligations, CloakedCare is the only platform that ensures 100% of donor intent is honored by paying merchants directly. This isn't just a feature—it's a fundamental reimagining of how crowdfunding can truly help people in crisis.
Frequently Asked Questions
How is CloakedCare different from donation-based websites if both are gift-based?
The key difference is payment flow. On traditional platforms, money is deposited into the recipient's bank account and they decide how to use it. On CloakedCare, recipients never receive the money—CloakedCare handles payment directly to merchants on the recipient's behalf, guaranteeing funds are used for the intended purpose.
Will I get a 1099 form for bills paid through CloakedCare?
No. Since CloakedCare handles payment directly to merchants and you never receive the funds personally, CloakedCare does not issue Form 1099 to bill recipients.
Why does merchant-direct payment matter if taxes aren't a concern?
Beyond taxes, merchant-direct payment protects vulnerable recipients from fund mismanagement, eliminates banking requirements, provides immediate bill resolution, and gives donors complete confidence their contribution achieves its intended impact. It's about trust, transparency, and effectiveness.
Can I deduct my donations to CloakedCare on my taxes?
No. CloakedCare is not a 501(c)(3) organization, so donations are not tax-deductible. They are considered personal gifts, just like donations on other donation-based platforms.
As a donor, can I be confident my contribution pays the bill I selected?
Absolutely. Unlike traditional crowdfunding where recipients can use funds for anything, CloakedCare's merchant-direct model guarantees 100% of your contribution goes to the specific bill you chose to help with. This is our unique value proposition.
What if I have a unique tax situation?
Always consult with a qualified tax professional or CPA who understands your complete financial picture. They can provide personalized advice based on your circumstances.
Additional Tax Resources
For more information about tax laws and regulations, visit these official resources:
CloakedCare is not affiliated with the IRS. These links are provided for your convenience.
Still Have Tax Questions?
While we provide general information, we recommend consulting a tax professional for personalized advice.