Skip to main content

Unsolicited, Unilateral Gifts Directed to Individuals


Financial gifts are given by several persons to our former pastor who is now retired. The question is: since they give through the church, are their gifts deductible and do we need to give him a Form W-2 at the end of the year or are these gifts not taxable? 


The way the question is worded leads me to believe that the actions of the donors were unsolicited (i.e., the church did not take corporate action to initiate the collection of funds in order to compensate its former pastor). The church is simply acting as a conduit to forward the gifts  to the pastor.

To be deductible, charitable contributions must be made to a qualified organization, donors releasing control of the funds to it in order that it might accomplish its charitable purposes. On occasion, a church will encourage contributions to enable it to compensate its employees, including its pastor(s). These contributions are deductible by the donors. The recipients are generally subject to income and self-employment tax (see other postings within this blog for exceptions or strategies to avoid or limit these taxes).

Payments to individuals are not considered qualified organizations per IRS Publication 526, even if the organization is used as a conduit to accomplish the donor’s unilateral show of generosity. Individuals who make contributions to another individual are not able to take a tax deduction, nor is the gift taxable to the recipient.

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 the posted question. Aaron Oberholtzer of Marinette, Wisconsin gets credit for this one.


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

 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.