Skip to main content

Deductions Against Missionary SE Income

Question:

A missionary in Australia for several years receives donations from a U.S. church. He was not aware that these donations were being reported on a Form-1099, and also thought that he did not have to file a tax return since he wasn't "earning" income. He is now subject to several years of SE taxes based on the 1099s. What are some allowable deductions/expenses against this income? He paid his own housing, traveled to other countries such as Thailand and Indonesia doing mission work, returned to the U.S. to report to his home church and solicit donations, etc.

Answer:

He can deduct what are classified as business expenses against this income. He should use Schedule C of Form 1040 to report his income and deductions. Typical expenses for a missionary include 1) car expenses at the standard mileage rate both in Australia and in the U.S. during furlough trips to churches, 2) air travel to and from the U.S. and to other countries, 3) ministry supplies (e.g. books, literature, office supplies), 4) postage, 5) meals and lodging while away from his tax home overnight on business, and 6) other line items listed on Schedule C.

Housing expenses for his family in Australia are not classified as business expenses.

Based on the question, it appears that the missionary may not have had the benefit of a mission agency to advise him regarding these matters. I believe that this is one of the many benefits for both missionaries and churches to use these agencies.

Comments

  1. You really know your stuff! We have a few churches we serve and they're always interesting cases. If I have any questions I'll be back!

    ReplyDelete
  2. How does filing as SE affect filing form 2555, foreign income exclusion?

    ReplyDelete
  3. Whether missionaries' sending agencies or churches treat them as self-employed or as dual-status individuals, they still file and pay self-employment taxes on Form 1040, Schedule SE. The exception-opting out of Social Security by means of a timely filed and approved Form 4361.

    Having clarified this point, the filing of Schedule SE has no effect on a missionaries eligibility to file Form 2555--Foreign Earned Income exclusion.

    ReplyDelete

Post a Comment

Popular posts from this blog

Qualified Small Employer HRAs

On December 13, 2016, President Obama signed the 21st Century Cures Act, allowing qualified small employers to offer Health Reimbursement Arrangements (HRA) that follow certain terms.

After the Affordable Care Act was passed, the IRS originally determined that an HRA was not a qualified group health plan. The Cures Act overrules this decision. HRAs are again an option for qualifying small employers.

To be eligible, the small employer must have fewer than 50 employees and must not offer a group health plan to any of its employees.

The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) must be subject to the following terms.
No salary reduction contributions may be made (i.e., 100% employer-funded).Employer must receive proof of employee’s minimum essential coverage.Reimbursements must be for qualifying medical expenses.Reimbursements for any year cannot exceed $4,950 (or $10,000 for family coverage), which will be adjusted annually for inflation.Employer must offer the …

Gifts Paid Out of Church Funds: Form 1099-MISC Requirements

Question:
 A church gave a wedding gift of $1000 to a couple who are church members. No goods or services were provided by the couple in exchange for the gift.  Is a Form 1099-MISC required? 
Answer: In the following answer, we assume that the couple are not employees of the church from whom the gift could not be viewed as compensation for their services. Also, the amount seems to be small enough to avoid any concerns of "private inurement."

Accordingly, no Form 1099-MISC is required. According to the 2017 IRS Instructions for Form 1099-MISC a Form 1099-MISC is only required for payment of goods or services. The requirements are as follows:
"File Form 1099-MISC, Miscellaneous Income, for each person to whom you have paid during the year:  At least $10 in royalties (see the instructions for box 2) or broker payments in lieu of dividends or tax-exempt interest (see the instructions for box 8);  At least $600 in:  1. Rents (box 1);  2. Services performed by someone who is not your …

Revised Form I-9 Released

The U.S. Citizenship and Immigration Services released a revised Form I-9. All new hires after January 21, 2017, must complete the revised Form I-9. All prior released versions of Form I-9 will be invalid for new hires.

Employers are required to have a completed hard copy of Form I-9 on file for each employee. Current employees do not need to re-complete the revised form.

More information on Form I-9 can be found on the USCIS website.