Solved: My husband receives a monthly “love” donation of $400 from our church. Do we report this? And if so, where?
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My husband receives a monthly “love” donation of $400 from our church. Do we report this? And if so, where?

 
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Level 15

My husband receives a monthly “love” donation of $400 from our church. Do we report this? And if so, where?

It's taxable income, and your church is in big trouble.

First the church: Any money paid to staff because they work there is taxable income.  Any money. Period.  It can't be designated as a gift.  In most cases, pastors are common law employees, even though they are considered self-employed for certain tax purposes.  You are a common law employee if you answer to the congregation, a board of elders or staff-parish committee, the denomination, diocese or district, or anyone else that has the authority to hire, fire or set the terms of employment. As a common law employee your wages are reported in box 1 of a W-2, even though boxes 2-6 may be blank.  The church likely has other state responsibilities to its common law employees such as providing workers comp insurance, unemployment insurance, or other state-required benefits and rules.

Only if the pastor is completely independent of any other authority, running an independent non-denominational church, can the pastor be considered self-employed or an independent contractor.  Even in that case, the church must issue a 1099-MISC to anyone who receives more than $600 per year in compensation for services.

Either way (1099-MISC or W-2) your church is not following the law and is vulnerable to audit.  Your leadership staff and treasurer desperately need an education in tax matters.

By not reporting your compensation correctly, the church is also depriving its pastors of a tremendous tax advantage called a housing allowance.  A housing allowance must be designated in advance and in writing by the congregation, board, or whoever has direct control over the pastor's working conditions.  It can save the pastor a lot of money, if they do it right.

Now for your spouse: since there is no W-2, you need to file taxes as a self-employed or independent contractor.  Use job code 813000. Report the $400 per month as cash wages not reported on a 1099-MISC.  You will owe income tax and self-employment tax.

Read this for more http://www.ecfa.org/PDF/2017-Ministers'-Taxes-Made-Easy.pdf

Your mileage might be in one of the internal program worksheets.  It might be part of your 2016 package if you print or download "all forms and worksheets" from your 2016 tax return on your account timeline.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

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4 Replies
Level 15

My husband receives a monthly “love” donation of $400 from our church. Do we report this? And if so, where?

What is the basis for the money.  Are you (for example) needy?  Does your husband provide any services for the church (sexton, housekeeping, pastor, etc?)
*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
New Member

My husband receives a monthly “love” donation of $400 from our church. Do we report this? And if so, where?

He is associate pastor. So it is a love offering for us each month. That is also how they will classify it on the church’s tax return. I want to make sure I am doing everything right!
New Member

My husband receives a monthly “love” donation of $400 from our church. Do we report this? And if so, where?

And can you tell me where I might find my husbands ending mileage from our 2016 taxes? I’ve lookes in my paperwork & cannot find it. I’ve also looked through last years paperwork on TurboTax & cannot find it! It has to match for this year, correct?
Level 15

My husband receives a monthly “love” donation of $400 from our church. Do we report this? And if so, where?

It's taxable income, and your church is in big trouble.

First the church: Any money paid to staff because they work there is taxable income.  Any money. Period.  It can't be designated as a gift.  In most cases, pastors are common law employees, even though they are considered self-employed for certain tax purposes.  You are a common law employee if you answer to the congregation, a board of elders or staff-parish committee, the denomination, diocese or district, or anyone else that has the authority to hire, fire or set the terms of employment. As a common law employee your wages are reported in box 1 of a W-2, even though boxes 2-6 may be blank.  The church likely has other state responsibilities to its common law employees such as providing workers comp insurance, unemployment insurance, or other state-required benefits and rules.

Only if the pastor is completely independent of any other authority, running an independent non-denominational church, can the pastor be considered self-employed or an independent contractor.  Even in that case, the church must issue a 1099-MISC to anyone who receives more than $600 per year in compensation for services.

Either way (1099-MISC or W-2) your church is not following the law and is vulnerable to audit.  Your leadership staff and treasurer desperately need an education in tax matters.

By not reporting your compensation correctly, the church is also depriving its pastors of a tremendous tax advantage called a housing allowance.  A housing allowance must be designated in advance and in writing by the congregation, board, or whoever has direct control over the pastor's working conditions.  It can save the pastor a lot of money, if they do it right.

Now for your spouse: since there is no W-2, you need to file taxes as a self-employed or independent contractor.  Use job code 813000. Report the $400 per month as cash wages not reported on a 1099-MISC.  You will owe income tax and self-employment tax.

Read this for more http://www.ecfa.org/PDF/2017-Ministers'-Taxes-Made-Easy.pdf

Your mileage might be in one of the internal program worksheets.  It might be part of your 2016 package if you print or download "all forms and worksheets" from your 2016 tax return on your account timeline.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

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