Skip to main content

Benevolence NOT Reportable on Form 1099-MISC

By
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.
Labels:

Comments

Post a Comment

Popular posts from this blog

Rental of a Church Parsonage to a Non-Minister

By
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...
Post a Comment
Read more

How can my ministry expenses be covered by the church?

By
     How can my ministry expenses be covered?                            Many ministers use their personal autos for ministry purposes. Their employers can reimburse these costs using a standard mileage rate published by the IRS. The per mile rate represents employees’ entire reimbursable cost other than highway tolls and parking tabs. If not covered by use of the ministries’ credit card, other costs can be reimbursed as well—business and travel meals, lodging, office supplies, and professional library purchases among them. Some ministries reimburse travel costs using per-diems published by the IRS. If employee business expenses are not reimbursed, the personal tax deduction benefit to the individual minister is severely limited. Non-taxable reimbursements after documentation is provided to the employer follows IRS rules for accountable plans. Non-taxable cash advances before expenses are in...
Post a Comment
Read more

What is the best retirement account for a Minister?

By
       What are my options for retirement savings?                  Regardless of options, start now! You probably have learned about traditional and Roth IRAs. We have often found them well short of the benefits we will share here regarding Internal Revenue Code section 403(b) plans. These plans must be established by your employer (although you might need to be the initiator). They are funded in two ways—withholding from your paycheck at your option (called “elective deferrals”) and as initiated by the employer (matching or non-elective contributions). These contributions not only save income tax, but they also reduce the income you must report as subject to the 15.3% SECA tax. Further, at retirement with the cooperation of your church or Christian ministry the distributions to you can be tax-free to the extent of your qualified housing expenses. Many ministries also adopt what are often called “FICA alternative” be...
Post a Comment
Read more