Skip to main content

Cautions for a Church Serving as a Missions Agency

Question:

Our church is thinking about acting as a missions agency by directly supporting some missionaries. Do you see any concerns with doing this?

Answer:

In the past, we have provided blog posts concerning how churches have chosen to serve as missions agencies. Recently, however, we have deepened our research and discussion concerning this complex topic. Our research and experience has provided some additional cautions about a church taking on the responsibilities of a missions agency. 

Regulations for missionaries continue to become more complex. Unless a church is willing and able to thoroughly research and act in accordance with these regulations, we strongly discourage churches from acting as missions agencies. We fear that either the church or the missionary will not have the expertise to comply with the law. 

Recently, the following topics have added to that complexity:
  • Affordable Care Act
  • Foreign Bank Account Reports (FBARS)
  • Payments to foreign nationals
  • Retirement plans
  • Employee vs. contractor classifications
  • Payments to foreign charities
  • Foreign Account Tax Compliance Act (FATCA)
  • Expense reimbursement plans
Before making a decision to act as a missions agency, we strongly suggest that a church consider contacting us or its own professional advisor. 

Comments

  1. Can I get some clarification on this... We have an India ministry that is set up under our tax id #. We collect support funds to be used for orphans, widows, training center, leperacy support, pastors and disaster relief. These funds are held in a separate bank account and dispersed to the missionary as needed by the ministry's bookkeeper. (The missionary's personal support is handled under a different mission agency.) We do not currently require an accounting of how these funds are being spent and I'm not sure how I need to report these funds W2 or 1099?

    ReplyDelete
  2. Great idea. These appear to be appropriate benevolent causes. The church should expect an accounting of how the funds are spent to assure itself that it is neither taxable income to the missionary nor dispersed for purposes that would be contradictory to compliance with Rev. Rul. 63-252. We have assisted client organizations to navigate these waters.

    If these disbursements are properly classified as benevolent, then there is no reportable income, meaning that there is no requirement to issue Form W-2 or Form 1099.

    ReplyDelete

Post a Comment

Popular posts from this blog

Housing Allowance and Form 1099-MISC Reporting

Question:

A church provides its minister a housing allowance, but for other purposes it believes that it must report the full amount of compensation (including the non-taxable housing allowance portion) on Form 1099-MISC (in order to demonstrate the full earnings of the minister). If the church reports his compensation,including the housing allowance, on Form 1099-MISC as taxable income, will he be able to deduct his housing expenses somewhere else on the Form 1040?

Answer:

This questions brings up a couple of issues. First, most ministers are properly classified as employees who receive Form W-2, not as independent contractors who receive Form 1099-MISC. On Form W-2, Box 1 for taxable compensation is reduced reflecting the church's designation of a portion of his pay as non-taxable. Then in Box 14, it typically reports as a memorandum item his additional non-taxable, housing allowance compensation. In the situation addressed in the question, this Form W-2 reporting may or may not a…

Review: Form 1099 Payments to 501(c)(3) Organizations

Question:

A church rented space from another church last year. Should it request a completed Form W-9 and issue Form 1099-MISC?

Answer:

We have written similar blog posts on this topic in the past (listed below), but we figured it was a good time for a review. 

Payments from one 501(c)(3) organization to another 501(c)(3) organization are not subject to Form 1099-MISC reporting. The 2015 Instructions for Form 1099-MISC state that "payments to a tax-exempt organization" are exempt from reporting a Form 1099-MISC. 

The following are typical examples of payments of $600 or more by a church which are subject to reporting a Form 1099-MISC:
Rent paid to an individual (non-corporation)Payments for services rendered by individuals who are not employees (e.g. janitorial service, facilities, snow removal, guest speakers)Support sent directly to missionariesHere are some similar blog posts that we have written in the past:

Form 1099 for Payments to Other Ministries
Form 1099 for Non-profit?
Fo…

Gifts Paid Out of Church Funds: Form 1099-MISC Requirements

Question:
 A church gave a wedding gift of $1000 to a couple who are church members. No goods or services were provided by the couple in exchange for the gift.  Is a Form 1099-MISC required? 
Answer: In the following answer, we assume that the couple are not employees of the church from whom the gift could not be viewed as compensation for their services. Also, the amount seems to be small enough to avoid any concerns of "private inurement."

Accordingly, no Form 1099-MISC is required. According to the 2017 IRS Instructions for Form 1099-MISC a Form 1099-MISC is only required for payment of goods or services. The requirements are as follows:
"File Form 1099-MISC, Miscellaneous Income, for each person to whom you have paid during the year:  At least $10 in royalties (see the instructions for box 2) or broker payments in lieu of dividends or tax-exempt interest (see the instructions for box 8);  At least $600 in:  1. Rents (box 1);  2. Services performed by someone who is not your …