Skip to main content

Employee Mission Trip Funded by Employing Church

By Anonymous
Question: 

 If an employee of the church is provided funds to go on a church mission trip are the funds considered a taxable benefit?

 Answer:

 These funds may qualify as a non-taxable, reimbursed business expense. In order for an expense to qualify as a business expense, it must be ordinary and necessary according to IRS Publication 535. Pub 535 states, “An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or business.” As a church employee, one may be expect to assist in fulfilling the mission of the church, including participation in mission trips.

Proper documentation of expenses is required to enjoy this non-taxable classification (MinistryCPA past blog post).

 If the trip was not required as a condition of employment by the church, then the employee may be able to take a tax deduction for the trip based on its charitable nature.

 For further information on charitable trips and related reimbursements see the following MinistryCPA Blog post: 
Labels:

Comments

Post a Comment

Popular posts from this blog

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

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
2 comments
Read more

Housing Allowance and Form 1099-MISC Reporting

By
Question: A church provides its minister a housing allowance but believes it must report the full amount of compensation (including the non-taxable housing allowance portion) on Form 1099-MISC in order to demonstrate the full earnings of the minister. (Starting in 2020, Form 1099-MISC is replaced with Form 1099-NEC for non-employee compensation.) If the church reports his compensation, including the housing allowance, on the Form 1099-NEC as taxable income, will he be able to deduct his housing expenses somewhere else on the Form 1040? Answer: This question brings up a couple of issues. First, most ministers are properly classified as employees who receive Form W-2 , not as independent contractors who receive Form 1099-NEC . Box 1 on Form W-2 reports taxable compensation. It is reduced to reflect the church's designation of a portion of his pay as non-taxable housing. Then, in Box 14 (Other), Form W-2 typically reports as a memorandum item his additional non-taxable, housing allowa...
Read more