MinistryCPA - Corey A. Pfaffe, CPA, LLC

Question: A church member wishes to become a missionary, and will spend the next six months training out of state. His church wants to pay for both his training and his living expenses (e.g., food, travel expenses, etc.) during that time so he can stay fully committed to his training. Is this support considered taxable income? Answer: In this situation, the individual in training is considered either an employee or an independent contractor of the church because he is being compensated for helping the church fulfill one of its responsibilities, the Great Commission. It may turn out, though, that he will end up with little taxable income. In determining whether the expenses paid by the church are considered taxable income, it is important to identify whether the individual's assignment is temporary or indefinite . The IRS provides a couple key indicators in determining the correct assignment.  The first indicator considers the amount of time spent away from one's main place of w...

Question: A church supports a missionary with a generous monthly disbursement to his mission agency. This regular monthly amount is disbursed from its general fund as a budgeted expenditure. A donor has made a contribution earmarking the same missionary with a designated gift. The church has not solicited or maintained a designated fund for this missionary. What alternatives might the church consider to handle the contribution? Answer: A church may apply one of two alternative policies to handle unsolicited designated contributions.  1.) While every missionary family could certainly put additional funds to good use, the first alternative implies the assumption that the current monthly amount from the church provides a very minimal or insufficient amount to support his or her work. Hence, additional support enabled by designated gifts will be most welcome, encouraged, and solicited. Because the designated gifts are above and beyond the budgeted amount, a separate designated fund mus...

Question:  Church members were planning to participate in a church-sponsored mission trip, and the participants have raised funds from various donors. Unfortunately, due to COVID-19 the trip was cancelled, and the church disbursed to the  participants  the funds that had been raised .  Should a Form 1099 be filed for any amount refunded in excess of $600? Answer: While the COVID-19 pandemic may be a rare occurrence, it is not uncommon for individual members to find it necessary to cancel their participation. When members cancel their participation for any reason, including the scenario described above, there are two ways we recommend the church handle the funds raised for the mission trip. The first is that the funds be returned to the original donors. Because the donors had provided their gifts for specific individuals to attend the trip, which is no longer taking place, the funds could be refunded to the donors. The second option is to place the monies in a designa...