Skip to main content

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.

Comments

  1. 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?

    ReplyDelete
  2. 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.

    ReplyDelete
  3. 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?

    ReplyDelete
  4. 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

    ReplyDelete
  5. If individual(s) raise funds to help fund their participation in a church sponsored mission trip (funds have come from various donors, not just participant) and the trip was cancelled due to Covid-19, will a 1099 need to be sent to the trip "participant" who was refunded the amount they raised if it exceeds $600?

    ReplyDelete
    Replies
    1. See our recent blog post at https://ministrycpa.blogspot.com/2020/09/treatment-of-funds-raised-for-cancelled.html

      Delete

Post a Comment

Popular posts from this blog

Rental of a Church Parsonage to a Non-Minister

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

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

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

Form 944 or 941 Filing for Churches

Question:   A new church filed for an employer identification number (EIN) recently. It received notification from the IRS about the EIN, stating that the church must file Form 944 by the following January deadline. The church has no non-ministerial staff members. Since income tax withholding is elective by ministers and none of the pastors has elected to request non-mandatory withholding is the church required to file Form 944 annually? Also, a quarterly Form 941 (rather than an annual Form 944) is required of some employers. Which IRS form, if any, should be filed? Answer: According to IRS Section 1402(c) and 3121(c), ministers are not subject to mandatory income tax withholding. Unless one or more ministerial employees request non-mandatory withholding, church employers with only ministerial employees do not need to file Form 941 or Form 944.  The IRS  Ministers Audit Technique Guide  explains in further detail a minister's treatments for social security, Medicare tax, Fed