Skip to main content

"Erroneous" Form 1099-MISC Issuance

By
Question:

 A minister receives a Form 1099-MISC from a church for which he provided no services during the year. His current church issues him a W-2. Is the Form 1099-MISC income taxable? If yes, how should he report this on his tax return?

 Answer:

 It is apparent that the church in the question above distributed money to someone, otherwise no Form 1099-MISC would have been issued! There are three likely explanations for a situation of this nature:

 The first possibility is actually a fairly common situation. It could be that the church that issued the Form 1099-MISC has identified him as a "missionary" and has chosen to support him financially even though he provides no services directly to that congregation. In this situation, the Form 1099-MISC income is taxable as support.

 Another alternative possibility is that he received Form 1099-MISC income that he was required by contractual arrangement to pass along to his employer who is already fully compensating him. In this case, he should report the Form 1099-MISC income on Schedule C; he should then deduct an identical amount as a ministerial expense, providing the name and Employer Identification Number of the employer to whom the income was forwarded.

Finally, it may be that an erroneous Form 1099-MISC has been issued. It is not wise, no matter the situation, to ignore the matter. An individual who believes that he has received a tax document in error should request a corrected form. He may wish to consult a tax professional to ensure proper reporting and avoid undue IRS scrutiny.
Labels:

Comments

Post a Comment

Popular posts from this blog

Church Car Purchase for Pastor

By
Question: A church would like to purchase a car for the pastor's use. What is the best method to accomplish this goal? Should the car be titled in the pastor's name? What will be the tax consequences of this arrangement? Answer: The church has two main alternatives for this purchase:  Title the car in the pastor's name and reimburse him for business expenses Title it in the church's name and treat personal use as taxable compensation There are fewer immediate tax consequences for the latter. Since both are viable options, we will discuss both situations in this post. If the church chooses to give the car to the pastor and register it in his name, he is free to use it for whatever personal use he desires with no tax consequences. However, the fair value of the car is taxable as compensation at the time it is given to the pastor. Internal Revenue Code section 102(c) clearly states that gifts given to employees by their employers are taxable compensation. The...
2 comments
Read more

Can Form 4361 be filed after the deadline?

By
Question:   Is it possible to opt out of Social Security after the 2-year deadline? Answer:  Unlike other employees, a licensed or ordained minister has the option to opt out of Social Security and Medicare (FICA). If a minister wants to opt out they must file Form 4361 by the tax deadline including extension, in the second year in which they have received ministerial income of $400 or more. This election is final, and the minister cannot opt back into FICA taxes.  At MinistryCPA, we have received questions from ministers who have exceeded the two year deadline and desire to opt-out. There have been several court cases which provide guidance in answering this question. Some have argued that the minister was unaware of the deadline, had mistakenly believed they had filed a timely election, were given incorrect advice by an IRS employee, or their opposition to participate in Social Security and Medicare did not arise until after the 2-year deadline had passed. In each of th...
Post a Comment
Read more

Rental of a Church Parsonage to a Non-Minister

By
Question: A church owns a parsonage, but the pastor does not use it as he owns his own home. The church rents the parsonage to a tenant other than a minister or employee of the church. Will the church be responsible for paying income tax on these monies as Unrelated Business Income (filing a Form 990-T) even if the money is used to carry on the business of the church? Answer: Whether the money is used for church purposes is irrelevant.  IRS Publication 598  states: "If an exempt organization regularly carries on a trade or business not substantially related to its exempt purpose, except that it provides funds to carry out that purpose, the organization is subject to tax on its income from that unrelated trade or business." Fortunately, in the case of rental income from real property, such income is "excluded in computing unrelated business taxable income" (Publication 598). Caution: see content below regarding debt-financed property.  However, a second concern not a...
Post a Comment
Read more