April 30, 2012

Benevolence NOT Reportable on Form 1099-MISC

Question:

If an individual is given money (more than $600) by a church as benevolence is he or she required to file Form 1099?

Answer:

Form 1099-MISC is used to report Miscellaneous Income for each person to whom a business or charitable organization paid during the year at least $600 in rents, services, prizes and awards, and other income payments. A recipient does not file Form 1099.

Form 1099-MISC should only be prepared when payments are made in the course of a trade or business. Businessdictionary.com defines “course of business” as the daily or regular routine peculiar to a firm or trade, involving purchase, production, and sale of usual goods and/or services, and payment and receipt of money. Benevolence is defined as an act of kindness or generosity. When benevolence is given to meet the needs of individuals, it is considered a charitable program of the church, is not taxable, and does not need to be reported on a Form 1099-MISC.

If the benevolence is in return for services, it is taxable and needs to be reported on a Form 1099-MISC. Benevolence paid to employees is not taxable as long as it is not being used to disguise compensation. One-time gifts used to meet emergency financial needs of employees would generally qualify as benevolence and not be taxable (just as they would for members of the church or community who demonstrated emergency need).

The members of my Federal Taxation I class at Maranatha Baptist Bible College in Watertown, Wisconsin have taken on the challenge of study and research to answer posted questions. James Jorgensen of Owatonna, Minnesota gets credit for this one.

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