Question:
A question has been posed regarding gifts to ministers, a topic I addressed in detail in a December 15, 2008, posting. A tax preparer has counselled a church that gifts from individuals to individuals are non-deductible (to the donor) and non-taxable (to the recipient). Does this condition also apply to gifts from an employer to an employee? Specifically, when a church congregation (the employer) collects donations to give to its pastor (the employee) are these gifts treated in the same manner as individual-to-individual gifts?
Here's the conditions behind the current question: "the church solicits them from the congregation and asks to have checks made to cash or to give cash to the church and then it is divided up to the pastor, youth pastor, etc."
Answer:
Fortunately, the pipe wrench I bought my wife for Christmas at Ace Hardware is not taxable to her. Unfortunately, I cannot take a tax deduction for it. (Just kidding -- really!)
The same is true when an individual member gives a gift to another member of the church who happens to be the pastor.
However, it's entirely a different story when an employer (the church congregation acting as a corporate body) takes a collection and gives it to its employee (the pastor). As a 501(c)(3) organization, a church is a qualified charitable organization. Gifts to it are tax-deductible. Compensation paid to an employee (in any form other than those I specified in my earlier blog entry) is taxable.
Some tax preparers may confuse tax law related to individual-paid gifts (part of the gift and estate tax code) and employer-paid gifts. All I needed to hear in the above question was "the church solicits..." and I knew we were addressing compensation issues, not gift issues. Making checks out to cash accomplishes nothing to defeat both the letter and spirit of the law.
A question has been posed regarding gifts to ministers, a topic I addressed in detail in a December 15, 2008, posting. A tax preparer has counselled a church that gifts from individuals to individuals are non-deductible (to the donor) and non-taxable (to the recipient). Does this condition also apply to gifts from an employer to an employee? Specifically, when a church congregation (the employer) collects donations to give to its pastor (the employee) are these gifts treated in the same manner as individual-to-individual gifts?
Here's the conditions behind the current question: "the church solicits them from the congregation and asks to have checks made to cash or to give cash to the church and then it is divided up to the pastor, youth pastor, etc."
Answer:
Fortunately, the pipe wrench I bought my wife for Christmas at Ace Hardware is not taxable to her. Unfortunately, I cannot take a tax deduction for it. (Just kidding -- really!)
The same is true when an individual member gives a gift to another member of the church who happens to be the pastor.
However, it's entirely a different story when an employer (the church congregation acting as a corporate body) takes a collection and gives it to its employee (the pastor). As a 501(c)(3) organization, a church is a qualified charitable organization. Gifts to it are tax-deductible. Compensation paid to an employee (in any form other than those I specified in my earlier blog entry) is taxable.
Some tax preparers may confuse tax law related to individual-paid gifts (part of the gift and estate tax code) and employer-paid gifts. All I needed to hear in the above question was "the church solicits..." and I knew we were addressing compensation issues, not gift issues. Making checks out to cash accomplishes nothing to defeat both the letter and spirit of the law.
Thank you for the helpful information. I am the church treasurer, and recently I needed to find a way to process a donation that one of parishioners made to our priest. The check was written to the church, with memo line "To the priest & family". Trying to figure out if it's taxable, I received conflicting info from web, local CPA, and even IRS (I called there and spoke to 5 different agents - none of them knew how to address this situation!).
ReplyDeleteSo, in the situation when church DID NOT solicit donation and it came as a true love offering, I notified donor that this gift is not tax-deductible to them (per IRS Pub. 526). But the rest - whether I should pass the same amount or treat is as a taxable bonus - is still unclear. What is your suggestion? Thanks.
It seems as if the church is simply serving as a conduit (perhaps to maintain the anonymity of the donor) for a personal gift: non-deductible expenditure by the donor and non-taxable receipt to the recipient.
ReplyDeleteWhat about a case where a donor would like to give a car to a missionary where the situation is that there is no solicitation, the mission agency is not involved in the transfer, it is from one individual to another, and the donor is not interested in a tax deduction?
ReplyDeleteA gift to a missionary of a car by a friend is not taxable to the missionary nor deductible by the donor.
ReplyDeleteSorry to belabor the point, but in relation to the previous question, if the donor is a long time supporter of the missionary through the organization, and a friend for even longer than that, would your answer change in any way?
ReplyDeleteNo change in my answer.
ReplyDeleteThis post and discussion was a great help!! Thank you!
ReplyDeletePastor,
Wade
If the church gives a weekly church check to a retired minister as a gift and no services rendered from the retired miister would the church still do a 1099 to him?
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteWe believe that a previous MinistryCPA blog post will provide the answer to your question: Retired Minister Continued Support from His Congregation.
ReplyDeletehttp://ministrycpa.blogspot.com/2009/10/retired-minister-continued-support-from.html
What if an individual gives a car to the church (wants a tax deduction) for the Pastor's family. If the church then gives the car to the Pastor, is it taxable?
ReplyDeleteFreddie,
ReplyDeleteWe believe that you will find the answer to your question in previous comments in this thread; both the issue of donating a car and the church as a conduit are addressed.