Missionary on Church Benevolence income

Technical topics regarding tax preparation.
#1
taxnoob  
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Hello all,
Have a new client that has not a filed a tax return from 2011-2018.

He wanted to check in his case and see if he actually has a filing requirement. I had him sign a POA, did compliance and pulled transcripts from the IRS. No filing requirements and they are not looking for it.

Also has no balances.

I am getting a mixed information and can't find the actual publication regarding this. He has been a missionary and just been receiving church benevolence to pay the necessities of life. I can't for some reason find the line on what separates him from clergy.

Thoughts?

Thank you
 

#2
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Is he only receiving money from one church for his support, or from other churches/people also?
 

#3
taxnoob  
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Seaside CPA wrote:Is he only receiving money from one church for his support, or from other churches/people also?


I just sent the e-mail verifying this. He just mentioned been doing it for several years.

What would it mean? If he was only receiving from one, will it make him a clergy status and should be on payroll?
 

#4
Noobie  
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Sounds like income to me.
 

#5
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I really don't know the answer. It sounds like you need all of the facts before making a decision. If he is only receiving money from one church, and it has been like this for several years, it could be income. Especially if they pay him a set amount each year and if they have some sort of contract with him. However, if he is receiving money from various sources, each source giving when and if they want, could be considered gifts.
 

#6
Gjkycpa  
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I would think it is income if from church as stated above. I have a newer client who is a missionary who goes to Haiti.
He receives a 1099 for $30,000 which I report as income on Schedule C and take his Haiti travel expenses as a deduction.
We applied for SE tax exemption on form 4361 and it was approved by the IRS (he is an ordained minister). The two years prior to the 4361 approval he was eligible for the EIC which helped on his SE tax. I have run a rough draft on Drake and his SE tax reduction is essentially negated by his EIC deduction. He also has some ACA calculations thrown in for good measure.
Not sure how SE tax, EIC and ACA interact (does anybody really know for sure), but looks like no reason to amend the returns.
One year he would get a small refund and one year a small payment due.
 

#7
JR1  
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I had a guy years ago, either with Youth for Christ or Campus Crusade....and they did have a special category that made most of their living expenses non-taxable...the organization has all the info you need. Get it from them.
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#8
Dennis2  
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Funds distributed by a benevolence fund are based on need, not taxable to recipient and there is no reporting requirement.
 

#9
Nilodop  
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I have learned over the years that Dennis2 knows what he is talking about. I have no experience with or knowledge about benevolence funds or their taxation. I read this article/blog. https://wagenmakerlaw.com/blog/loving-t ... enevolence. It seems to say clearly that the recipients of the benefits don't have taxable income, so long as they are not impermissible private benefits. The article seems to support Dennis2. Importantly. so does RR 2003-12, which is pretty clear on the matter. It refers to gifts (102), disaster relief (139) and one that's sometimes overlooked, the general welfare exclusion.
 

#10
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Dennis2 wrote:Funds distributed by a benevolence fund are based on need, not taxable to recipient and there is no reporting requirement.


Agreed, benevolence was the key word.

My only question is if this is a long-term situation is it still a situation of benevolence. I guess that’s a question the church is responsible for.
 

#11
taxnoob  
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Client's response to me:

"I do 98% of my mission work over seas, I was in Africa for 20 years. I am in Papua New Guinea. Most of the time I live with indigenous people and minister to them on a grassroots level.
When I come to the US, I only visit family and a few supporting churches to give updates and return again."

Would "overseas" and "few supporting churches" make this not taxable income? I mean the benevolence he receives is very minimal.
 

#12
mscash  
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What do you mean by church benevolence income? If he is working full time as a missionary, that is his occupation. It's not like giving gifts to the poor. When you put money in plate at church some of it ultimately flows to the church staff as salary that they pay income tax on. The missionary supported by the church, or several churches, is no different. The procedure for some mission organizations--and I am particularly thinking of Wycliff Bible Translators--is that donors, be they individuals or churches, send their donations to the organization specifying that it is intended for a particular person. The organization takes a percentage (Wycliff takes 10% to cover its main office expenses) and sends the rest to the missionary has his/her taxable income.
 

#13
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And some missions organizations include it properly on a W2. I know YWAM used to be one of these.
 

#14
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Agree with Dennis that if the money is coming from a benevolence fund, it would be non-taxable. As Razorback stated, if it is a long-term situation, is it truly benevolence? Is it actually being paid from a benevolence fund?

There is a revenue ruling regarding a missionary that was representing his particular church. The church reimbursed some of his expenses, and that was deemed a reimbursement - not income. Maybe it will give you some insight into their thinking.

https://www.charitableplanning.com/libr ... nts/667059
 


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