Skip to main content

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

By Anonymous
Question:

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

Answer:

Payments from one 501(c)(3) organization to another 501(c)(3) organization are not subject to Form 1099-MISC reporting. The IRS 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 missionaries


Labels:

Comments

  1. Baptist Church Financial SecretaryDecember 4, 2020 at 2:30 PM

    Thank you for your blog post.

    So if "payments to a tax-exempt organization are exempt from reporting a Form 1099-MISC", are there no circumstances in which a church should receive a 1099?

    I ask this question because our church is looking to cash out a $25,000 annuity that was purchased many years ago under the previous pastor. We have been told by the annuity company that they will issue a 1099 to the church for the amount of interest the annuity has gained over the years. Is this an error on the part of the annuity company? It is my understanding that a church is not required by the IRS to file a tax return every year. But if we receive a 1099 for interest earned on an annuity, will that mean that we have to file a tax return for that year?

    ReplyDelete
    Replies
    1. Brayden ShortDecember 7, 2020 at 11:05 AM

      Great question! Most annuity companies will issue a 1099 as part of their regular process no matter the filing status of the receiver. Receiving a 1099 does not change the filing requirements of the church, if you are otherwise exempt from filing that will still be the case. That being said we do recommend keeping the form 1099-INT for your churches records.

      Delete

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

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

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