Skip to main content

May a Benevolent (Non-Taxable) Gift Be Given to a Guest Speaker?

By
Question: 

A church had a guest speaker fill the pulpit twice during the span of the year. For those two times, the speaker received a total of $1,000 in honorarium ($500 per Sunday). The church issued him a Form 1099-NEC for that amount. 

However, during the course of the year the speaker and his wife encountered substantial hardship. Is it permissible that the church choose to offer assistance to the speaker from its benevolent fund? Will a gift of this nature be taxable income to him?

Answer:

To determine whether the gift is considered taxable income in this case, let's consider the following.

1) The nature of the gift.
            The nature of the gift should be entirely benevolent. If the gift is given to supplement the less than fair value amount paid to the speaker for his services, or with the expectation he will speak again in the future, the gift is considered income and is taxable to the individual. Benevolent disbursements are not considered taxable income to the recipient as long as they are not given as compensation for services rendered to the church. 

2) To whom the gift is given.
            Careful disbursement of benevolent funds helps avoid the appearance of disguised compensation. The best practice is to distribute the funds directly to the need (e.g., a hospital) rather than to the individual. Alternatively, if it is the speaker's wife who was hospitalized and accumulated a large medical bill, the funds may be considered benevolence to her rather than to her husband, again helping to avoid the appearance of disguised compensation to the guest speaker. 

3) The process used by the church to determine benevolent disbursements.
            A system should be in place to ensure that benevolent funds that are disbursed on behalf of employees (or others who provide services to the church) are distributed in a manner identical to that of non-employees. Churches should have a process for members to communicate needs to church leaders. It is good practice for a group or committee of trusted and confidential members/leaders to make wise determinations of need and disbursement. Doing so will protect the church and its leaders from the appearance of favoritism and disguised compensation.

It is permissible for the church to extend a benevolent gift to the guest speaker and his wife. Also, the gift is not considered taxable income for the recipient considering the cautions mentioned above. 

Also see...



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