Sunday, January 23

Form 1099-MISC for Missions Trips

Questions:

Should a church issue a Form 1099-MISC in the following situations?

1. Church member takes a short term mission trip. Money is raised by asking for donations to the church. The church writes checks to the person for more than $600. No accounting of expenses is required of the member.
2. Same as above, but church reimburses expenses for the trip based on an accounting provided to the church (essentially an expense report).
3. Are the answers different if the trip is not actually sponsored by the church but done by a church member through another organization?

Answers:

Assumptions:
  • The church member is serving as a volunteer and not an employee of the church.
  • The trip is for ministry purposes, not a disguised personal vacation.
If the church member had paid his or her own travel expenses, they would have been deductible as an out-of-pocket charitable contribution. Any reimbursements received simply reduce the amount of charitable deduction.

Form 1099-MISC is issued for amounts that payees receive as Miscellaneous Income. Since the disbursements were not in exchange for services rendered, they are not reportable on Form 1099-MISC.

Ministries expect volunteers to return any excess funds provided to them that are not needed to provide religious services. When an employee (not a volunteer) represents a ministry on a ministry trip, any excess disbursement to him or her will be considered taxable income. If no documentation is received from the employee, the entire amount should be treated as a non-accountable plan fully reportable on his or her annual Form W-2. The employee can then deduct the allowable expenses on Form 2106 as employee business expenses.

The sponsor (church or otherwise) should not effect the above answers.

4 comments:

Anonymous said...

I'd like to ask a related question:

Suppose an individual went with a group of people (not an organization) to Haiti after the earthquake to build a school and church, and they received donations from people (non-church members) that were funneled through their church so that the donors could receive a tax deduction. One check that was funneled through was for $1000, the others $500 or less, all from different people.

Would the recipient of these donations (which were used exclusively for a plane ticket and other trip-related expenses) receive a 1099 for the money they received for their mission trip?

Corey Pfaffe said...

The situation you describe seems to fit quite well with the hypothetical example in the original blog entry -- no Form 1099-MISC should be issued.

Anonymous said...

Thank you for this information! Suppose it is a trip to the Holy Land, and the travel agency gives a free trip for every so many people who purchase a ticket. Can that free trip go to the volunteer organizer without a 1099 being issued if the travel agency donates the trip to the church? What about a pastor/spouse - would it then be taxable income?

Corey Pfaffe said...

The nature of the trip is an important consideration in this scenario, as only trips for charitable and employment related purposes are eligible for tax preferential treatment. IRS Publication 526 lists the requirements for a charitable deduction for travel expenses:

"Generally, you can claim a charitable contribution deduction for travel expenses necessarily incurred while you are away from home performing services for a charitable organization only if there is no significant element of personal pleasure, recreation, or vacation in the travel…The deduction for travel expenses will not be denied simply because you enjoy providing services to the charitable organization ...”

If these requirements are met, the trip will not be taxable income to the volunteer, but, of course, the volunteer cannot take a charitable deduction for travel expenses he did not incur.

In the case of the pastor who is an employee participating on behalf of the church, employment law applies (we presume). For his spouse, see the following blog post:

http://ministrycpa.blogspot.com/2011/09/expenses-for-wife-attending-conference.html