A older member of our church, a retired children's ministry worker for another organization, is living on a small monthly Social Security benefit. As a church, we have decided to provide her with a monthly love gift. Can we treat this recurring gift in the same way as ordinary benevolent gifts (as nontaxable income)? Are we required to provide her with a Form 1099-MISC?
The key consideration here is her relationship to her current church: did she ever provide services to this church in the past? If so, the IRS will likely view this benevolence as payment for past under-compensation, and it will be taxable. If, however, the church has no obligation to make up for lack of compensation for past services, and the motive is truly benevolent, this should be treated as standard benevolence; no Form 1099-MISC should be issued.
Please follow the links below for other guidelines relating to benevolence.
Benevolence Fund Receipts and Disbursements
Benevolence Not Reportable on Form 1099-MISC