Skip to main content

Reporting of Income by Foreign Missionaries

By
Question:

 Some of the churches supporting a foreign missionary have issued him Form 1099-MISC reporting non-employee compensation. Does he need to fill out a Form 1040, Schedule C (or C-EZ)?

 Answer:

 Yes, he must file Schedule C. Most churches send their support to a missionary's mission agency. The agency then typically issues to him a Form W-2 for employee earnings. Churches bypassing the agency and making direct contributions to the missionary are treating him as an independent businessman (in the eyes of the Internal Revenue Service) rather than as an employee of the agency. For a number of reasons that I've spelled out in earlier blog postings (type "mission" in the search window of this blog) I believe that best practice is to use the agency as a conduit for the contributions.
Labels:

Comments

  1. WendyJanuary 20, 2014 at 12:38 PM

    Our church is sending a 1099 to a medical mission. A young lady from our church went to this country, married a native of the country and they now run two medical missions with staff, rent, etc. as expenses. Can these be include as well on the Schedule C that they will file?

    ReplyDelete
  2. Corey PfaffeJanuary 25, 2014 at 9:56 AM

    Wendy,

    Yes, independent contractors may deduct their business expenses on Schedule C, according to IRS Publication 535.

    ReplyDelete

Post a Comment

Popular posts from this blog

Rental of a Church Parsonage to a Non-Minister

By
Question: A church owns a parsonage, but the pastor does not use it as he owns his own home. The church rents the parsonage to a tenant other than a minister or employee of the church. Will the church be responsible for paying income tax on these monies as Unrelated Business Income (filing a Form 990-T) even if the money is used to carry on the business of the church? Answer: Whether the money is used for church purposes is irrelevant.  IRS Publication 598  states: "If an exempt organization regularly carries on a trade or business not substantially related to its exempt purpose, except that it provides funds to carry out that purpose, the organization is subject to tax on its income from that unrelated trade or business." Fortunately, in the case of rental income from real property, such income is "excluded in computing unrelated business taxable income" (Publication 598). Caution: see content below regarding debt-financed property.  However, a second concern not a
Post a Comment
Read more

Review: Form 1099 Payments to 501(c)(3) Organizations

By Anonymous
Question: A church rented space from another church last year. Should it request a completed Form W-9 and issue Form 1099-MISC? Answer: Payments from one 501(c)(3) organization to another 501(c)(3) organization are not subject to Form 1099-MISC reporting. The IRS Instructions for Form 1099-MISC state that "payments to a tax-exempt organization" are exempt from reporting a Form 1099-MISC.  The following are typical examples of payments of $600 or more by a church which are subject to reporting a Form 1099-MISC: Rent paid to an individual (non-corporation) Payments for services rendered by individuals who are not employees (e.g. janitorial service, facilities, snow removal, guest speakers) Support sent directly to missionaries
2 comments
Read more

Housing Allowance and Form 1099-MISC Reporting

By
Question: A church provides its minister a housing allowance but believes it must report the full amount of compensation (including the non-taxable housing allowance portion) on Form 1099-MISC in order to demonstrate the full earnings of the minister. (Starting in 2020, Form 1099-MISC is replaced with Form 1099-NEC for non-employee compensation.) If the church reports his compensation, including the housing allowance, on the Form 1099-NEC as taxable income, will he be able to deduct his housing expenses somewhere else on the Form 1040? Answer: This question brings up a couple of issues. First, most ministers are properly classified as employees who receive Form W-2 , not as independent contractors who receive Form 1099-NEC . Box 1 on Form W-2 reports taxable compensation. It is reduced to reflect the church's designation of a portion of his pay as non-taxable housing. Then, in Box 14 (Other), Form W-2 typically reports as a memorandum item his additional non-taxable, housing allowa
Read more