I am a pastor who is helping to start a new church. The church started in October of 2018. I was doing everything a pastor would normally do; however, I was not hired or paid. I received no pay as an employee or contractor. Near the end of the year, one of the members donated $5000 to the church for the purpose of giving the money to me as a gift. The gift was spontaneous and not part of an organized gift effort. I believe the person who gave the gift took a tax deduction for the gift.
1. Is this gift taxable?
2. If it is taxable, how should it be reported?
Money that you receive as a gift is not taxable income to you, and you do not need to report it on your income tax return. Money that you gave as a gift to someone else is not deductible for your taxes.
Turbo Tax does not support the gift tax form 709, but here is a link:
Gifts received are not reported by the recipient of said gift on any tax return.
Gifts given are reportable by the giver if the amount or value of the gift given exceeds $15K in any one tax year.
So as the recipient of a gift, you have nothing to be concerned with here.
Now if the giver issues you any kind of tax reporting document for that gift, then the bottom line is, it's not a gift and will need to be reported. I've seen numerous instances where someone is mislead to believe they are receiving a "gift" of say for example, $1000. Then are surprised at tax filing time when they receive a 1099-MISC with the amount reported in box 3 of that form. This usually occurs because the giver discovers they can't deduct a gift given. So they issue a 1099-MISC so they can claim it as a deductible expense of some sort.
I agree with the two previous responses that gifts are not considered taxable income be the recipient. In this case however, I believe that the IRS would consider this "gift" as actually a payment for past or future services you performed or will perform for the church. Therefore, I believe this "gift" would be taxable to you as self-employment income. You would be allowed to deduct expenses you incurred while performing your work for the church against this income.
In my opinion, the person giving the money to the church would not be able to deduct the $5000 amount as a charitable deduction as he specified where the money was to be spent.
Thank you all for your responses.
TWB - If you are correct, does that mean that the church should have issued me a 1099-Misc? They didn't do that. Do I need to tell them to do that? They aren't sure about this either.