Skip to main content

"Tax Home" Clarification

Question:

A missionary to a foreign country has received some contradictory advice: "When we started our deputation, I was told by Tax Preparer 1 that since we did not have a 'tax home' we could not claim travel expenses as deductions." Tax Preparer 2 advised the missionary "that since s/he was self employed, s/he did not need a tax home for travel deductions." Could you please clarify this confusion or provide a list of resources where an answer could be obtained?

Answer:

First, let me suggest a couple of helpful resources: 1) IRS Publication 463, and, perhaps less so, 2) type "Tax home" in the search window of this blog.

While a minister is self-employed for purposes of self-employment (SE) tax, this status has no relevance to the determination of deductibility of travel expenses. Tax Preparer 2 is incorrect. Publication 463: "Travel expenses defined. For tax purposes travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job" (emphasis added). Whether traveling for a "business" as a self-employed individual or for a "job" as an employee s/he must be traveling "away from home."

Whether Tax Preparer 1 is correct depends on the facts and circumstances of a missionary's deputation situation. (Once a missionary is "on the field" his tax home is most likely his personal foreign residence or his "mission station," if he has one.)

Once again, Publication 463 is helpful: "As an itinerant, you cannot claim a travel expense deduction because you are never considered to be traveling away from home." I run into this concern most often with my itinerant evangelist clients. They tend to own no permanent residence. Rather, they purchase a travel trailer and move from location to location. Their meals, for example, cooked in their own travel trailer are not considered travel expenses since they are not "away from home." A missionary on deputation using the same accommodations as an itinerant evangelist will not be able to deduct his travel expenses (the Publication provides a list of these expenses).

However, as is the experience of all of my missionary clients, during deputation they establish a home base from which they conducted their "business" of raising support. It may be in a church "missionary house" or in a home they own or rent. But they return there between trips. This becomes their "tax home" and travel costs while out-of-town, overnight are deductible. Generally, trips they take within a day (and return home at night) offer only car expense write-offs.

Comments

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