Timing of Contribution Deduction

[JohnH]

i disagree

[FEDUKE404]

Follow up questions

...might be a reminder to the participant that they can also deduct legitimate out-of-pocket expenses related to the mission trip(s). They often incur expenses such as immunizations, visas, meals enroute, special clothing, etc.

Just curious. Has any of this specific mission arrangement ever withstood an actual IRS audit ??

On a side note, I am aware that members of the LDS Church (Mormons) routinely go on a mission trip while in their college years. Do they also write off everything as a "donation"?? I don't really see a great deal of difference between the two scenarios.

FE

[JohnH]

This is copied from a web site which discusses the deduction for mission trip expenses. The reference to the publication is valid.

Publication 526 says, "Generally, you can claim a charitable contribution deduction for travel expenses necessarily incurred while you are away from home performing services for a charitable organization only if there is no significant element of personal pleasure, recreation, or vacation in the travel. This applies whether you pay the expenses directly or indirectly. You are paying the expenses indirectly if you make a payment to the charitable organization and the organization pays for your travel expenses.

"The deduction for travel expenses will not be denied simply because you enjoy providing services to the charitable organization. Even if you enjoy the trip, you can take a charitable contribution deduction for your travel expenses if you are on duty in a genuine and substantial sense throughout the trip. However, if you have only nominal duties, or if for significant parts of the trip you do not have any duties, you cannot deduct your travel expenses."

Churches and mission trip members will have to decide for themselves if they were "on duty" throughout the trip or if they were simply performing nominal/no duties for a significant part of the trip. However, it is likely in the above stated situation that the amounts paid represent tax-deductible contributions.

[TaxGuyBill]

This is copied from a web site which discusses the deduction for mission trip expenses. The reference to the publication is valid.

Publication 526 says, "Generally, you can claim a charitable contribution deduction for travel expenses necessarily incurred while you are away from home performing services for a charitable organization only if there is no significant element of personal pleasure, recreation, or vacation in the travel. This applies whether you pay the expenses directly or indirectly. You are paying the expenses indirectly if you make a payment to the charitable organization and the organization pays for your travel expenses.

"The deduction for travel expenses will not be denied simply because you enjoy providing services to the charitable organization. Even if you enjoy the trip, you can take a charitable contribution deduction for your travel expenses if you are on duty in a genuine and substantial sense throughout the trip. However, if you have only nominal duties, or if for significant parts of the trip you do not have any duties, you cannot deduct your travel expenses."

Churches and mission trip members will have to decide for themselves if they were "on duty" throughout the trip or if they were simply performing nominal/no duties for a significant part of the trip. However, it is likely in the above stated situation that the amounts paid represent tax-deductible contributions.

Please note that it is under the heading "Out-of-Pocket Expenses in Giving Services". Again, I don't think it is a contribution to the church, it is an out-of-pocket expense. Of course, either way it is deductible.

http://www.irs.gov/publications/p526/ar02.html#en_US_2013_publink1000229674

[JohnH]

I see your point. I suppose it turns on how you read the sentence "You are paying the expenses indirectly if you make a payment to the charitable organization and the organization pays for your travel expenses."

[MAMalody]

JohnH, I think I would agree with you taking the deduction in the year of the trip, when the funds were irrevocably commited. I did some limited research and could find nothing on point.

[JohnH]

Thank you Mike. I appreciate your input and the input of everyone on this thread. I gained some new insight into how to account for the trip expenses as well as points to emphasize when distributing info on the trips, some of which might serve to help support the deductibiity if a participant were ever audited.

I am also leaning toward recommending that we acknowledge the payments for all trips separately, rather than as a partt of the regular giving statement. Not so much because of any requirement, but as a means of reminding the participants that they always have out-of-pocket costs which they should add to their deduction. The acknowledgment could even list some of the most common of these, plus make suggestions regarding others which may or may not apply.

[TXEA]

Contributions are generally deductible in the year given. As such, a contribution that is made unrestricted three years from now does not seem like it would be deductible in 2017 if given in 2014.

The element of refund makes this appear to not be a completed charitable contribution. Thinking about this in the gift tax arena, it does not seem like a completed gift for tax purposes in the year given (e.g., 2014).

Although, back to gift tax, if the gift restrictions are removed in a later year, then we have a completed gift. Still, contributions are deductible in the year paid.

I would look for another way to do this. Really, these should be out-of-pocket expenses for the mission volunteers. I think the church is simply helping the volunteers save for the trip.

[mscash]

Timing of contribution

What happens if you decide not to go on the trip after making payments during more than one year? Do you get your money back? If so, it's more like a savings account that you use to pay for the trip when it happens.

[Burke]

That's interesting. Is there a particular reason for the separate contribution receipt, other than the size of the gift? Our year-end statement allows us to code each cash/check contribution on the "Memo" line for such things as Undesignated, Building Fund, Benevolence, Food Pantry, Mission Trip, etc.

No, not really. Their receipts are not that detailed, so I thought a separate one might be best due to the size and type of the contribution. Also, the separate receipt for the mission trip is given to only 10-15 members, perhaps. So only a few of those go out. The church books and pays for the flights, makes the reservations, etc. etc and generally coordinates the trip. This allows them to take advantage of group discounts on airlines and hotels. For regular cash/check contributions, I asked the bookkeeper to attach a copy of the QB record which details those items and attach it to the receipt. This was to satisfy the IRS requirement for a receipt detailing each contribution.

[BOB W]

Since the payments are not to the general fund, it is nothing more than a savings account until it is disbursed for the trip. I would suggest the the church take the "savings account" money and deposit it into the General Fund account and disburse it from there. At that time a receipt can be issued to each participant for that year's for deduction.

[JohnH]

Interesting that this discussion caused me to re-think the separate receipt vs combined receipt issue. I'm coming around to the idea that a separate receipt might be more appropriate for other reasons. In addition to the "No goods and services.." boilerplate, I'm thinking of suggesting some additional wording to the statement. This is because I discovered on a recent trip that some church members were not aware they could deduct trip-related out-of-pocket expenses over and above the trip cost collected by the church. In some cases, this can amount to several hundred dollars. Sure hate to see them miss out on a legitimate deduction.

[Burke]

I think that is a good idea and might suggest it myself. Tks.

[taxxcpa]

Just curious. Has any of this specific mission arrangement ever withstood an actual IRS audit ??

On a side note, I am aware that members of the LDS Church (Mormons) routinely go on a mission trip while in their college years. Do they also write off everything as a "donation"?? I don't really see a great deal of difference between the two scenarios.

FE

I wonder if Mitt Romney wrote off his college mission trips.

If a missionary is sent to convert people from Religion A to Religion B, and another missionary goes to convert people from Religion B to Religion A, it amounts to a wash-out. Is any real benefit derived from these missions?

[ChEAr$]

Just curious. Has any of this specific mission arrangement ever withstood an actual IRS audit ??

On a side note, I am aware that members of the LDS Church (Mormons) routinely go on a mission trip while in their college years. Do they also write off everything as a "donation"?? I don't really see a great deal of difference between the two scenarios.

FE

Agree. All those payments will be for personal living expenses of the missionaries. does our tax law grant a deduction for mission trips OUTSIDE the US of A? If so, something's wrong with the tax code.
Charity begins at home, or so I always thought.