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Batteries as Housing Allowance Expense

Question:
Do batteries qualify as a housing allowance expense?

Answer:
The expenditure for batteries, if meeting the following general guidelines for use in connection with the pastor's personal residence, may meet the requirements. Although there are not likely court cases or Revenue Rulings citing the exact examples offered here.

In a June 2016 post, we shared the following:

"A minister’s housing allowance benefit is non-taxable income to the extent that the allowance is used for housing expenses. The three-part test includes consideration of the fair rental value of the home, plus actual costs of utilities (see this blog post regarding the three-part test). In addition, the expenses must be incurredrelative to the minister’s principal residence. According to Federal Tax Regulations, Regulation, §1.107-1, Internal Revenue Service, Rental Value of Parsonages, only food and servants are specifically excluded."

If, for example, the batteries are for a smoke alarm in the ho…

A "Gift" from Gain on Parsonage

Question:
A church would like to "gift" 10% of the sale price of the parsonage to a pastor towards his retirement. Is the pastor going to be subject to income tax on that gift? Is it taxable if put into an IRA
on his behalf?

Answer:
Whether the gift is paid is paid to him directly or through contributions to his Traditional IRA, the “gift” will be taxable and reportable on Form W-2, Box 1. Internal Revenue Code section 102(c) clearly states that gifts given to employees by their employers are taxable compensation. The IRS has consistently applied this provision to self-employed (non-employee) individuals who provide services for an organization as well. Only the facts and circumstances surrounding a gift can determine whether IRC section 102(c) does or does not apply; a letter stating that a payment is a gift will not override the substance of a transaction (2008 Blog).

Having said this, the church may wish to consider other alternative means. For example, cooperation with the p…

Special Topic: A Great Cloud of Witnesses, William Carey

William Carey: The Father of Modern Missions by S. Pearce Carey, 1923, The Wakeman Trust, London, ISBN 978-1-870855-61-7 Follow link for an Introduction to the Cloud of Witnesses series

S. Pearce Carey, William Carey’s great grandson, offers a family perspective on the brilliant mind and consecrated life of one who first left England to reach to the regions beyond with the Gospel of Jesus Christ.  From the historical setting of his birth on August 17, 1761, to the legacy he left in the land of India and upon the world following his death on June 9, 1834, Carey’s life story leaves its reader with a sense of enablement to attempt great things for God. For William Carey once said,

Expect great things from God. Attempt great things for God.
It was 32 years before Carey left England never to return. He was motivated by the lives and stories of such men as Captain John Cook, explorer of the islands of the South Pacific and mapper of New Zealand and present day Australia; slave trader turned abol…

Special Topic: A Great Cloud of Witnesses, John Newton

John Newton: From Disgrace to Amazing Grace by Jonathan Aitken, 2007, Crossway Books, ISBN 978-1-58134-848-4
Follow link for an Introduction to the Cloud of Witnesses series

In his biography of John Newton, Jonathan Aitken colors a canvas with broad strokes of a physical life and spiritual influence enabled and preserved by the grace of God. Drawn from an apparent deep study of both long-available and recently accessible origin archives of Newton’s life, Aitken explores the sea captain turned preacher’s troughs and peaks while leaving the reader wanting more but appreciating the concise and enriching overview.

Amazing Grace, how sweet the sound,
That saved a wretch like me.
I once was lost but now I'm found,
Was blind, but now I see.

Untiringly rebellious from his youth, Newton brought grief to his parents and employersalike. Born July 24, 1725, to Captain John and Elizabeth Newton of London, young John lost his mother and spiritual mentor when he was not quite seven years old. She taught…

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 …

Paying Health Insurance Premiums for an Independent Contractor

Question:

A church treats it's missionary as a Form 1099-MISC independent contractor. The church is considering directly paying health insurance premiums on the missionary's behalf.  If he were an employee these payments would be considered a fringe benefit and be excluded from his income. However, because he is an independent contractor, is the church required to include the amount paid somewhere on his Form 1099-MISC. IRS publications seem to only be referring to employees in the exclusion sections. How and where would the church report these payments?


Answer:

According to IRS Publication 15-B, "A fringe benefit is a form of pay for the performance of services. ... A person who performs services for you doesn't have to be your employee. A person may perform services for you as an independent contractor, partner, or director."

But in order to exclude payments for health insurance from income, the payments must be made to an employee (IRS Pub. 15-B).

If an independent…

Special Topic: A Great Cloud of Witnesses, Introduction to the Series

A Great Cloud of Witnesses by Corey Pfaffe The writer of the book of Hebrews followed his Hall of Faith chapter with these words: Wherefore seeing we also are compassed about with so great a cloud of witnesses, let us lay aside every weight, and the sin which doth so easily beset us, and let us run with patience the race that is set before us, Looking unto Jesus the author and finisher of our faith; who for the joy that was set before him endured the cross, despising the shame, and is set down at the right hand of the throne of God (Hebrews 12.1-2). Like the first Century Christians, we have our own modern day GreatCloud of Witnesses. They are the men and women upon whose devotion we stand. As 21st Century Christians, these witnesses strengthen and encourage usto fully submit to God’s work in our lives and to respond to the eternal motivation He has placed before us—eternal life with our Heavenly Father in gratitude for the simple uses He made of our earthly days. Authors of Christian bio…

Non-deductibility of Charitable Use of One's Property

Question: 

A church member is allowing one of its missionaries to live in one of her rental properties for a year. Is she able to get a tax deduction for this generous act? If so, what is the church's responsibility to the church member who is providing the free rental?

Answer:

This donor would not be able to deduct the expenses in this situation because of the partial interest rule. According to IRS Publication 526, "Partial Interest in Property Generally, you can't deduct a charitable contribution of less than your entire interest in property. A contribution of the right to use property is a contribution of less than your entire interest in that property and isn't deductible. Example 1. You own a 10 story office building and donate rent free use of the top floor to a charitable organization. Because you still own the building, you have contributed a partial interest in the property and can't take a deduction for the contribution."
Hence, the church has no resp…

Written Acknowledgement of Donations to 501(c)(3) Organizations

Question:

A church official is responsible for providing contribution receipts to the members of his congregation for their tithes and offerings which they have given for the year. Several members of the congregation make their contributions by placing a check in a giving envelope. However, they intentionally do not put their names on the envelopes. Is it required by law that the church official keep track of what they are giving through their checks and give them a contribution receipt at the end of the year?

Answer:

A charitable organization is not required by law to issue receipts to donors for their contributions. However, in most cases, donors cannot receive a charitable tax deduction without the cooperation of the organization. We suspect that a charity that fails to serve its donors in this respect will soon lose its support.

According to IRS Publication 1771 an organization should prepare and send out written acknowledgments to to donors by January 31 following the tax year. This …