Pastor Love Offerings

[quicksam]

I have seen different arguments to the Pastor Love Offering debate. Some say if the church does not get involved, and the members hand the gifts directly to the Pastor then it is just a gift which is not taxable to the pastor. It would be subject to Gift Tax rules by the giver though. Under this argument if the church collects the "Love Offering" and then distributes it to the Pastor, then it should be reported as taxable income.

Another argument is that it is taxable no matter what.

How do some of you handle a situation like this? And if you have any Regs on it please cite them.

Thanks

[ATSMAN]

You have to spread the word to the faithful. If you love your priest, make the check payable to the priest and keep the church out of it. Your priest will say an extra prayer for you!


You make the check out to the Church and then church pays the priest, it is taxable (generally)!

[RLymanC]

Love offering

According to Sec. 102, gifts received directly from relatives and personal friends for personal reasons are not taxable income. When you have not preformed a service and someone give you a gift and it does not come from an employer, the gift can be considered non-taxable

[John of PA]

It gets complicated when someone who does offer services and get taxable compensation for it, has such an endering relationship with the flock, that some want to give them a personal gift (love offering). IRS seems to insist this is a taxable bonus, but is it really. There is a very fine line here. If the intent is a personal gift and not compensation, it should not be taxable, in my view.

[mastertaxguy]

Love Offerings

I have seen different arguments to the Pastor Love Offering debate. Some say if the church does not get involved, and the members hand the gifts directly to the Pastor then it is just a gift which is not taxable to the pastor. It would be subject to Gift Tax rules by the giver though. Under this argument if the church collects the "Love Offering" and then distributes it to the Pastor, then it should be reported as taxable income.

Another argument is that it is taxable no matter what.

How do some of you handle a situation like this? And if you have any Regs on it please cite them.

Thanks

May want to check out Banks, 62 TCM 1611 (1991) and a web site: freechurchaccounting.com. At best, such "offerings" are tips and tips are reportable and taxable as income. If your inquiry is client specific for you can do your own due diligence. Pastors claim them as gifts to them; parishioners claim them as charitable donations. If you have to make THE decision no one will be happy so decide if you want to get involved.

[MAMalody]

Per Richard Hammer: Churches sometimes collect “love offerings” from the congregation for a pastor, intern, or other staff member in recognition of services rendered. Such offerings must be reported as taxable income. If the recipient is an employee, the love offering should be added to his or her Form W-2. If the recipient is not an em¬ployee, the income should be reported on a Form 1099-MISC if $600 or more.

EXAMPLE. A pastor reported $28,000 as income from his church. The IRS audited the pastor’s tax return and concluded that he understated his taxable income by $24,000. The pastor insisted that the $24,000 of unreported income came from voluntary gifts or offerings from members of the congregation, which were not taxable. The IRS rejected this argument, and the pastor appealed to the Tax Court. The court agreed with the IRS that these “gifts” represented taxable income for the pastor. It conceded that gifts are not taxable but concluded that the distributions made by the church to the pastor were not gifts. It observed, “The evidence that we do have strongly suggests that the transfers were not gifts. . . . The transfers arose out of the pastor’s relationship with the members of his congregation presumably because they believed he was a good minister and they wanted to reward him. Furthermore, the pastor testified that without the gifts his activity as a minister was essentially a money losing activity. In short, as the pastor recognized, the so-called gifts were a part of the compensation he received for being a minister. As such, the transfers are not excludable from income.” The court assessed a negligence penalty against the pastor because he failed to make a reasonable attempt to comply with the tax law. Swaringer v. Commissioner, T.C. Summary Opinion 2001-37 (2001).