How to handle the upcoming 1099K forms as a 508c1a nonprofit org

[deltabravo]

My question is about how to handle the upcoming 1099K forms as a 508c1a nonprofit org. 

The 508c1a operates as an online church and conducts zoom services regularly. Attendees are church funders who make a regular requested donation of 30 dollars monthly, and they use online payment platforms PayPal and Stripe to do it. The church also sends regular email correspondence in the form of personal life encouragement to funders who donate 5 dollars monthly, with some recipients also receiving the regular emails as part of the 508 church’s mission, even though they have not donated.

I have notified both PayPal and Stripe of the 508c1a status of the online church’s accounts where donations are received, but both companies refuse to classify the payments as donations because the 508c1a designation does not receive an IRS determination letter like a 501c3 gets. Without the IRS determination letter, the donations are treated as exchanges for goods and services, which they see as the donations supporting the monthly zoom meetings and the regular email encouragement. 

I am the pastor. I conduct the 508 church’s online service meetings and I write the regular email encouragements. The 508 church is newly formed, just three years old, and I currently have not received a salary as a w2 employee or as a 1099NEC, nor any other type of compensation such as a housing allowance, though the Board has approved it and put it in writing when the time comes. 

There are operating expenses for the 508 such as the website domain and platform, a commercial email account, an online video meeting platform, recordings and the storage of the meetings for replay, annual nonprofit registration fees, post office box fees, etc. 

Thus far, the 508 has filed zero tax forms of any kind since it’s inception, and as its clergy I have filed zero tax forms also since there has been zero compensation paid to me or anyone else of any kind to operate the 508.

By the end of 2023, the 508’s bank account will reflect more than 600 dollars received in electronic payments from both Stripe and PayPal in 2023 monthly donations, or as they label it, as payment for the sake of monthly goods and services for the church meetings and the email correspondences. 

When the 1099Ks arrive for the 2023 tax year from PayPal and Stripe, how should the 508 handle the tax forms? What Turbo Tax product, if any, would be appropriate to report the donations and expenses in order to keep from getting a letter from the IRS regarding a failure to report 1099K earnings? 

I have been a personal and self proprietor Turbo Tax user for many years, and I am very familiar with using the Schedule C to report 1099 income in those scenarios. However, as a noncompensated clergy of a 508c1a church now, I have no idea what to do with the coming 1099K forms. 

This is my first time attempting to post a question to the Turbo Tax community. Thank you to all who reply, and I’ll tag @Opus 17  who I have noticed replies to nonprofits in the community.
Warmest regards,

deltabravo 

[Opus 17]

I can't really help you.  You need to see a good qualified accountant.

First, your issue appears to be with the payment processors.  You could apply for a tax exempt letter under 501(c)3 if you wanted to.  Because you choose not to apply by invoking 508(c)(1)(A), I can't tell you what you would need to do under the terms of service of the payment processor to not be issued a 1099-K.  You may want to review the services offered by the IRS EO office.

https://www.irs.gov/charities-non-profits/exempt-organizations-reporting-changes-to-irs

https://www.irs.gov/pub/irs-pdf/p1828.pdf

You likely should apply for an EIN, otherwise you will have to use your personal SSN to receive your payments.  You can do this online at the IRS web site.  (Note that the person who applies for the EIN will be listed in the IRS records as the responsible person, and if there are any questions about the church's taxes, they will contact that person.   Once you have an EIN, if you later need to change the business name, address or the responsible person, you can send a letter to the EO office informing them of the change.

I have some concerns with certain services and benefits being contingent on a specified fee.  I realize that some churches today do this routinely and seem to get away with it (e.g. Scientology), and I know that in the past, church members were often expected to make specific donations, and sometimes families even bought their own pews (as in a church pastored by my great-great-grandfather around the turn of the 20th century).  But I can see why the payment processors might be uncomfortable with the arrangement.

If the 1099-Ks are issued in your personal SSN, there is a way to deal with that on your personal tax return, but you may get a letter from the IRS.  If you obtain a church EIN and 1099-Ks are issued, the church could file a form 990, although it is not required of churches.  If you get 1099-K forms and don't file form 990, and if the IRS then sends followup letters to the responsible person for the EIN, then you would have to write back and explain.  Here, I think you would be best served by an accountant who specializes in church tax matters. 

[deltabravo]

Thank you, @Opus 17 . The 508 does have an EIN, and thank you for recommending that incase it didn’t. I will follow your link to the IRS EO and I’m also looking for an accountant well versed in 508c1as. I’ll consider filing a Form 990 even though it’s not required if it comes to that. Surely other nonprofit 508s will be afloat in this boat when it comes to 1099Ks. I’m focused on being proactive. I also appreciate your commentary  about specified donation amounts. Thank you for your kind attention. 

[Opus 17]

Be aware that any church is still a 501(c)(3) tax exempt organization.  Section 508(c)(1)(A) exempts churches from the requirement that they must apply for recognition as a 501(c)(3) organization, but your church is still a 501(c)(3) organization. 

[LtR1]

Check out this website.  They may be more helpful to you.  Usually, the IRS will not respond to inquires or questions concerning 508c1a Organizations.

https://www.nongov508c1a.org/irs-info

May God continue to bless you and your Organization!

[LtR1]

Here is another website that may be helpful to you:

https://www.nonprofitissues.com/to-the-point/what-difference-between-501c3-and-508c1a

The best to you!