Tuition Payments for an Intern

Question:

A young person attends a Bible college and volunteers at his local church during the summer and school holidays. Can the church make a payment toward his college tuition without it being taxable to him?

Answer:

If the church above were to make a payment towards their young person's school bill, it would be considered compensation for services which the young person had performed while working at the church. The payment would have to be reported to him as taxable income. If it is determined that he was an employee, then the church would need to file a Form W-2 (typically subject to FICA tax employee withholding and employer matching); if it is determined that the young person was an independent contractor, than the church would have to file Form 1099-MISC if the payment was $600 or more.

A 2008 blog post, while it deals with a slightly different version of the above post, can be consulted for further help with this issue:

http://ministrycpa.blogspot.com/2010/08/taxability-of-in-kind-payments-by.html

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MinistryCPA - Corey A. Pfaffe, CPA, LLC

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