Skip to main content

Church's Issuing Form 1099-MISC to Missionaries

Question:

In the case of giving cash donations to a missionary who has applied for and received an Internal Revenue Code 501(c)(3) determination letter as a tax-exempt organization, what is the amount that can be given before it becomes a Form 1099-MISC issue? What about those who do not have a 501(c)(3) organization but are members of a known missionary organization?

Answer:

Payments to non-employee individuals for services rendered in excess of $600 per year are reportable on Form 1099-MISC (see instructions for the Form at www.irs.gov). Since a 501(c)(3) tax-exempt organization is not a "non-employee individual," no Form 1099-MISC requirement applies. The payments are considered to be made by one tax-exempt organization to another.

If the church wishes to receive confirmation of a missionary's statement about the organization, it can request a copy of its determination letter (a common practice for many 501(c)(3) charities). Perhaps just as effective is to simple send the missionary IRS Form W-9 -- Request for Taxpayer Identification Number and Certification. If the missionary is not an individual, but, rather, employed by a 501(c)(3) organization, he or she can check a box labeled "exempt payee."

If the missionary is not associated with a missions board or other tax-exempt charity, then Form W-9 will facilitate collection of the necessary information to issue Form 1099-MISC. Missionaries affiliated with a missions board are considered employees of their agencies and receive Form W-2 from them.

Comments

  1. Dear Mr. Pfaffe,
    I cannot thank you enough for creating this blog. The information contained in these posts has been so helpful to me as a financial secretary who is very good with numbers but has had very little formal training on how to properly handle our church finances. I learn more each year that I continue in this position, but still had a lot of questions. Many of my questions were answered today by reading your blog. Thank you!

    ReplyDelete

Post a Comment

Popular posts from this blog

Mission Trips Involving Both Charitable and Personal Time

Question:

A church group went on a two-week mission trip, and a few of the members stayed an additional two weeks for personal time. Will the members who stayed the two additional weeks be able to deduct expenses from the trip?

Answer:

IRS Pub 526 covers the topic of Charitable Contributions and, more specifically, travel expenses associated with charitable trips. The publication states that travel expenses will be deductible “if there is no significant element of personal pleasure, recreation, or vacation in the travel.” The publication also states, “The deduction for travel expenses won't be denied simply because you enjoy providing services to the charitable organization. Even if you enjoy the trip, you can take a charitable contribution deduction for your travel expenses if you are on duty in a genuine and substantial sense throughout the trip. However, if you have only nominal duties, or if for significant parts of the trip you don't have any duties, you can't deduct you…

Supporting a Retired Pastor

Question:

Can a church provide monthly support to a pastor who is no longer actively in the ministry without jeopardizing its tax-exempt status? If so, should a Form-1099 MISC be issued? 
Answer:
First, this action would not jeopardize tax-exemption status. The action of supporting a retired minister is within the boundaries of exempt purposes. 
Second, the post retirement support is compensation. The compensation should be reported on a Form 1099-MISC unless he is still considered to be an employee who should therefore receive Form W-2.


This is the "bad news." However, let's revisit a blog post we provided in 2009.

http://ministrycpa.blogspot.com/2009/10/retired-minister-continued-support-from.html

"A retired minister may receive part of his or her pension benefits as a designated parsonage allowance based on past services. Trustees of a minister’s retirement plan may designate a portion of each pension distribution as a parsonage allowance excludible under IRC § 107. (Re…

Housing Allowance when Bartering for Rent Payments

Question:

If a minister rents his principal residence, but he performs services (mowing the lawn, repairing the roof, etc.) in lieu of rent, can he still qualify the rent amount for a housing allowance tax benefit?

Answer:

Of course, bartering income is taxable. The Internal Revenue Code interprets that above situation as follows: tenant/minister receives taxable income for the fair market value of the services he provides, andtenant/minster pays landlord for renal of residence. The minister in this case reports taxable income for services provided in lieu of rent. It is also likely subject to self-employment tax. He may then claim as qualifying housing allowance expense equal to the amount he "pays" for rent of his personal residence. Essentially, there is no difference than if the minister and his landlord simply traded checks.

See a past MinistryCPA post regarding this topic: http://ministrycpa.blogspot.com/2016/09/services-to-church-in-lieu-of-rent-of.html