Skip to main content

Timing of Taxability of Missionary Support Handled by an Agency

Question:

A mission agency inquires as to the amount included on Form 1099-MISC filed each year. The office believes that the should be the total of all of the support that came in for the missionary during the year. Most of its missionaries zero out their accounts each month (i.e., what comes in to the agency's account each month goes out to the missionary immediately).


A missionary asks the agency to deposit a set amount each month into his/her personal account and to leave the rest in the hands of the agency. A clarification is needed as to whether the amount received by the agency or the amount disbursed to the missionary is the proper amount to record on Form 1099-MISC.

Answer:

The answer to this question relates to a tax concept called "constructive receipt." If a mission is simply acting as a clearing house for contributions and missionaries have unlimited and unsupervised access to funds held on their behalf, then all funds are taxable to the missionary as they are received by the mission. In these cases, all contributions received by the missionary are immediately reported as taxable income since he or she had unrestricted access to them. They were constructively received even if not deposited into a personal bank account.

However, to my understanding, most mission agencies take an active role in serving both the donors and the missionaries. Donors understand that such agencies receive contributions on the behalf of their missionaries and provide oversight in disbursements to them. Missionaries must submit budgets for their personal living expenses. They must document business expenses for appropriate reimbursement out of funds received by the agency from donors.

If donors designate contributions to special projects on a missionary's post, then the agency ensures compliance with the designation.

In these cases, a missionary is taxed only as he or she receives funds from the mission for personal living expenses.

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