October 26, 2012

Compensation to Volunteers

Question:

A church has used the voluntary services of a bookkeeper and would like to gift to her a $500 gift card. Since she is not an employee of the church, is this gift taxable?

Answer:

The gift card will be treated as taxable compensation for services rendered. If she is an employee, this income will be reported on a Form W-2. If she is not an employee her income will be reported on a Form 1099-MISC (unless her annual earnings fall below $600) and will be reportable by her on Schedule C and also subject to Self-Employment tax on Schedule SE.

Volunteers who incur documented out-of-pocket expenses on behalf of a church may be reimbursed on a tax-free basis. This includes use of an automobile to travel to the church site and on other errands. The mileage reimbursement rate for such volunteers in 2012 is $.14 per mile. In December 2012, the IRS will likely announce its 2013 standard mileage rates.

2 comments:

  1. We rent a school cafeteria for our Sunday services. We sometimes give a gift/tip to the janitor. Do we need to worry about tax implications or reporting for these gift/tips (e.g. give a 1099-Misc etc)?

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    Replies
    1. The payments from the church to the janitor will be viewed as taxable compensation for his/her services. The $600 limit cited in this four year old post is still valid.

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