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?
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.