Skip to main content

Benevolent Gifts to Employees (Emergency or Not?)

Question:

If a church issues benevolence assistance for an employee of the church is this considered taxable income to that employee? Additionally is the church required to pay the taxes on this benevolence assistance? The payment would not be issued directly to the employee but rather to a vendor on his/her behalf.

Answer:

Generally, gifts to an employee by an employer are taxable to an employee (reportable as such on Form W-2) and subject to the same employer taxes (i.e., matching FICA tax of 7.65 percent) that any other compensation entails. This is true regardless whether the payment is made directly to the employee or to another payee on the employee's behalf.

However, employees are also members of local congregations and ocassionally have emergency issues that a benevolent fund might respond to just as it would to any other recipient. These benevolent gifts are generally irregular and responsive to uniquely identified needs (e.g. a doctor's bill, a utility payment, or a plane ticket to attend a funeral). This is probably the rare exception to taxability of a payment from a church fund to a church employee that could avoid taxation.

On the other hand, if the payments are regular and intended to supplement an otherwise below market rate of compensation, it is my judgment that the regular payments on behalf of such an employee would certainly be taxable to the employee and subject to employer payroll taxes.

Comments

  1. Hi Corey,

    Thanks for writing on this topic. Do you have any sources you can reference to support your stance on this issue? I'd love to find something that supports the idea that even a rare exception can be made for a church employee receiving a benevolence disbursement and calling it nontaxable.

    ReplyDelete
  2. Situations such as yours are universally dependent on the specific facts and circumstances of each case. Resolution will likely require professional assistance.

    ReplyDelete

Post a Comment

Popular posts from this blog

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: 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

Special Topic: U.S. Olympic Champion Ben Peterson's Autobiography "Road to Gold"

Road to Gold , by Ben Peterson We are privileged to serve our client Ben Peterson and Camp of Champs, the wrestling ministry he founded   and directs. Ben wrestled for more than 16 years, coached on a collegiate level for 28  years, and has directed Camp of Champs for more than 40 years. We have read his autobiography and found Ben's dedication to the sport and his faith to be inspiring. If you are looking for a good story we highly recommend Ben's  Road to Gold. In Road to Gold , Ben shares the lessons he learned throughout his upbringing and how they led him to achieve Olympic victory. Ben states a key element of his youth was the consistency of his parents. He was encouraged to read the Bible every day from an early age, which he now describes as the most stabilizing habit in his life. Throughout his story Ben also emphasizes the importance of confidence, solid goals, hard work, and consistency. These qualities helped Ben throughout his life and wrestling career, from learni

When you don't know what you don't know

Here at MinistryCPA, we recognize that many churches rely on volunteers and/or part-time treasurers and financial secretaries.  With this in mind, we seek to come alongside ministries in providing the much-needed support to ensure that they are operating in a manner that is both compliant with governing authorities and taking advantage of opportunities for improved stewardship of ministry and employer financial resources.  Please consider this brief checklist to determine if your ministry needs to look further into areas that could be classified as “We don’t know if we are compliant.” Please check all compliance requirements that are currently being met: File quarterly Form 941 or annual Form 944 with the IRS Issue Forms W-2 to all employees and File Forms W-2/ W-3 with SSA Ministerial Housing Allowance is only listed in box 14 of the Form W-2 – it is not included in box 1 Obtain Form W-9 from all individuals/businesses that are paid the cumulative total of $600 or more in the year f