church wants to give visiting minister a gift. Taxable income?

[schirallicpa]

I have been asked to help out a newly formed church. They've got me on the fence with this question, and similar situations that they get in.

They had a popular local minister come to their church to visit, and he ended up doing the Sunday morning sermon. They had not contracted for him to come. They had not promised him any money to come. But they passed the plate around a second time on Sunday morning to collect money to give to the minister as a "gift".

This money was collected and counted, and then a check was written to the minister.

I said - 1099.

They said - oh no. This was just given to him as a gift for his coming. We did not pay him to come.

They have run into this before when they were collecting "gifts" for their own pastor. I stood my ground on that one. He was an employee of the church to begin with, and the gift was no more than a payroll bonus in the real world. I made them give him a 1099.

This one I want to ask you fine folks on the forum about. They didn't think it was fair that this guy would get penalized (taxed) for doing a nice thing and coming to their new church and volunteering to speak.

Any thoughts? I believe the amount collected was around $500.

[BulldogTom]

Lets say you show up on a Sunday and do some light bookkeeping, W2's and 1099's for them at the end of the year. You don't expect to get paid but they pass the plate and give you a "gift" of $500. What would the IRS say to that?

Just because it is a church giving it out does not make it tax free.

Tom

Hollister, CA

[OldJack]

It is a 1099 misc, box 7, nonemployee compensation.

[Bart]

Whenever I have gotten a "gift" I did not have to do anything to get it. Heck, I did not even have to be nice.

[Lion EA]

And those gifts to the regular pastor? Not 1099s, but include on his W-2.

I agree that the unexpected visitor gets a 1099, box 7.

[JohnH]

The church is not required to issue a 1099-Misc unless he shows up unexpectedly again and the total for the year exceeds $600. However, the minister is required to report the $500 honorarium on his personal return irrespective of whether or not a 1099-Misc is issued. But that isn't any business of the congregation's - it is a matter between the minister and the IRS (although the minister's Boss has a position on the matter which He explained in Matthew 22:21)

[jainen]

>>the minister is required to report the $500<<

I agree. The minister is required to report it as taxable compensation for personal services. However, you might make a case that the church only acted as a conduit for the payment, so I'm not sure it would have to issue a 1099 (if over $600). As for "they didn't think it was fair that this guy would get penalized (taxed)," I suspect that thought was not unanimous. A common religious tradition interprets "render unto Caesar that which is Caesar's" to mean legal taxation is a duty, not a penalty.

[JohnH]

Aren't all parties who issue 1099's simply conduits? - Just sayin'

[MAMalody]

No 1099 is required because of the dollar amount. It is taxable. The money was solicited to recognize the speaker for the help/sermon he did for them. I know many ministers who come to churches with no promised payment/honorariums/gifts amount promised. They are simply being compensated for services rendered.

[jainen]

>>I know many ministers who come to churches with no promised payment/honorariums/gifts amount promised.<<

Nothing religious about it. Same thing for a dancer's tip jar in a bar, or a street mime passing the hat. Very much the same, I'm sure.

[BulldogTom]

<<Same thing for a dancer's tip jar in a bar>>

And how do you know that? You continue to amaze me Jainen.

Just pokin' fun at you. No malice intended. I am sure it is just from a dancer client that you had and you did the research to make sure you gave them the proper tax advice.

Tom

Hollister, CA

[schirallicpa]

Has anyone been getting paid with one dollar bills?

[schirallicpa]

Thank you everyone. I love this forum and the fact that I can post a question like this out there without feeling like I'm getting beat up for it. I know I know the answer, sometimes. Especially in a case like this. We all know the answer. And so do those people at that church. But they make such a genuine argument, that I was reluctant to be the bad guy. So it goes. We're always the bad guys. I will use the Caesar quote in my response to the:)

[kcjenkins]

Well, in this case, if he never comes back, the $600 rule would let them off. But you are right to stand your ground, because you never know until the end of the year what the total may be. And the point you are making to them is that when they pay anyone for his services, whether it's under a contract or not, it's taxable income to the one receiving it, and reportable by the church. It might have been intended by the members as 'gifts', but the tax code does not allow that treatment when the 'gift' is related to his 'gift' of his time. That is the same rule that prohibits the owner of a grocery store or a car dealership, etc, to give his employees a "Christmas gift" of over $25 value, without including it in their W-2. If the church had just decided to 'gift' the man some money because he needed it, that would be part of their mission as a church. But that is not what happened.. They took up that collection for him because he came and spoke, and that is part of what he does for a living, no matter what other motives he has in his heart,

[Lion EA]

Don't forget to have him fill out a W-9 before you give him funds.

[jainen]

>>I am sure it is just from a dancer client<<

Well, you know times are tough. Sometimes one has to trade services in lieu of professional fees--but of course I always report the FMV as taxable income!