A church is paying its organist by making a donation to his daughter's trust fund. This is being done because the daughter is disabled and receives public assistance. If the organist makes over a certain amount this assistance will cease. Does this comply with IRS rules?
Our interpretation of the question: Is it appropriate to redirect an employee’s compensation to someone other than the one providing the services, then excluding these amounts from reportable income?
The situation described above appears to be a classic example of bartering. Regardless of the form of the compensation (even if attempts are made to characterize the income as benevolent gifts), the one earning the compensation is subject to taxation. If the amount of compensation exceeds IRS filing requirements, either Form W-2 or Form 1099-MISC should be filed depending on the employee or independent contractor status.