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Showing posts from October, 2010

Prizes Given at Charitable Events

Question:

A church hosted an event primarily for religious purposes, but required guests to purchase a ticket or receive one from someone who had purchased a ticket for them. Several prizes were given away that were either purchased by the church or donated to it. Is the church responsible to issue a Form 1099-MISC with the fair market value of the prize in Box 3 at the end of this year?

Answer:

If a prize winner receives a non-cash item with a fair market value greater than $600, then Form 1099-MISC must be issued to the winner for its full value. Perhaps the most widely accepted authority for this requirement is simply the IRS instructions to Form 1099-MISC (link below).

Form 1099-MISC Instructions

Payments to a Foreign Minister

Question:

What are the reporting requirements for a minister who is not a U.S. citizen, but performs services in the US? Does sending his earnings to his foreign location make any difference?

Answer:

Depending on several factors, it is likely that this minister is classified either as a resident or nonresident alien. His income is reportable on Form W-2 if he was an employee while in the U.S. or on Form 1099-MISC if he was an independent contractor. Sending the money overseas does not avoid the reporting requirements.

IRS Publication 519--U.S. Tax Guide for Aliens--may be helpful both to the ministry and to the minister. The ministry may also wish to explore Form 1042 and instructions--Annual Withholding Tax Return for U.S. Source Income of Foreign Persons. Also, Tax Topic 851 may be helpful (link provided here).

Topic 851

Probably the easiest way for a local church without foreign tax knowledge to deal with this issue is to advance the funds to the minister's (or to his U.S. sponsor…

Form 990 for Church "Subordinate Organizations"

Question:

A qualifying church is not required to file an annual informational return (Form 990). Would this change if the church owns a single member LLC? Assume that unrelated business income tax (UBIT) is not as issue.

Answer:

Great question and a new one on me! But it seems that its qualification under the church and its exemption falls under the Group Exemptions provisions of the Internal Revenue Code. Specifically, whether the LLC is a "subordinate organization" will likely determine its inclusion under the church's filing waiver. IRS Publication 4573 (link below) seeks to define the qualifications and may be helpful.

IRS Pub 4573

As the inquirer points out, the UBIT matter is important. Churches earning unrelated business income must file Form 990-T and pay income tax on any profits.