Missionary

[Bonnie]

Have a customer who moved to Honduras to do mission work in Oct 2013. I filed 2013 return for him for income he earned prior to the move. He has never returned to the USA since the move so lived totally in Honduras for all of 2014. Since then his living expenses for himself, his wife and daughter have been through a 501c3 he created quite some time before making the move. This was all planned for several years. The 501c3 he created falls under his church. I am being asked by him and also by the church if they need to issue any type of tax document to him for his living expenses or any money he uses. My thinking is no that this all falls under missions. Just trying to make sure I give good advice and anything necessary gets done. The family is doing amazing things in Honduras starting churches and humanitarian work. They plan to stay indefinitely. Thanks

[mastertaxguy]

US Citizens/World Wide Income

Have a customer who moved to Honduras to do mission work in Oct 2013. I filed 2013 return for him for income he earned prior to the move. He has never returned to the USA since the move so lived totally in Honduras for all of 2014. Since then his living expenses for himself, his wife and daughter have been through a 501c3 he created quite some time before making the move. This was all planned for several years. The 501c3 he created falls under his church. I am being asked by him and also by the church if they need to issue any type of tax document to him for his living expenses or any money he uses. My thinking is no that this all falls under missions. Just trying to make sure I give good advice and anything necessary gets done. The family is doing amazing things in Honduras starting churches and humanitarian work. They plan to stay indefinitely. Thanks

1. If TP had any income, as a U.S. Citizen he may be required to file a US tax return.
2. If not a US citizen, TP and family may have a problem with non filing when they return to US soil.
3. Not sure about the payment of expenses for TP and family through a self-created 501(c)(3). Might want to consult one of the numerous "pastoral tax services" which have on-line presence. My personal choice as been Worth Publishing in which I have absolutely no financial interest.

[Bonnie]

Not trying to not file, just trying to decide if there really is income. He's more than willing to file and with the small amount it could possible be he would absolutely have no taxable income anyway. Has a home here that is rented out but that will come up with a loss.

[MAMalody]

I have not seen this situation before, however, it looks to me like a missionary (pastor) being paid by a church or other 501(c)(3) for services rendered, just like any other missionary. He probaby should receive a W-2 and file a tax return.

[Bonnie]

He is not being paid by the church. He established his own 501c3 that flows under the church. His expenses for living are paid from contributions to the 501c3. He does not draw a salary. I realize this could be considered in kind payment. But he does not work for anyone nor for the church. It's a very unique situation. Not trying to get out of filing if he needs to. Total expenses less than 10,000. If he needs to file there will be no taxable income. Just trying to do things right, but personally I don't see a need to file.

[Bonnie]

He also had considerable savings of his own when he went that he has drawn from and used for his expenses

[Lion]

The 501(c) should be filing a W-2 for what it pays him for his services. Plus he has rental income, interest/dividends/capital gains, etc. If his income is as low as you say, then it wouldn't take much unreported income for the substantial under-reporting penalty to apply. And, if he never files, the SOL never starts running. File a return. Also, file the 990 for his not-for-profit.

[Burke]

I had the same situation for a missionary in Puerto Rico. He was sent there sponsored by an organization which was formed as a tax-exempt entity in Illinois, but they apparently never applied for 501(c)(3) status with the IRS as far as I could ascertain. However, a local group in Virginia where the church was located who sponsored him, solicited donations for his living expenses through this organization and sent them to him each month. He may have solicited donations himself, but checks were all made payable to this entity. I did his tax return reporting all as income (no W-2 or 1099) and taxing it on Sche C for social security purposes for a number of years. He never owed income tax due to dependents and EIC, and the first year it offset any liability with a resulting refund. Since the amount of income kept going up, so did his tax bill each year for SE purposes, and the EIC got less, so that the last year I did it, he owed over $2K. From what I gleaned, none of the other missionaries in the system with the same situation ever filed a tax return. He stopped sending his tax information to me two years ago and I do not know what he is currently doing in that regard, but I believe it is reportable, taxable income. These are not personal gifts. And, I determined that the donations were specifically designated for him by the donees, even though they routed them through the TEO.

[Koss]

Tax Exempt Organization

Bonnie--

You may be dealing with a gray area of the law, or a set of facts and circumstances that is open to more than one interpretation.

A charitable organization can, in certain circumstances, provide housing, food, transportation and other living expenses to someone who is working for the organization as an unpaid volunteer.

There are plenty of cases of outright fraud, in which people have attempted form a "charitable" organization, then donate most or all of their salary from their real job to that organization as a tax deductible contribution, and then have the organization provide housing, food and other stuff to them and to their family. This sort of thing is sometimes done by someone claiming to run a church in their basement.

But that's not what you're describing.

If I accept a volunteer assignment from a bona fide US charitable organization to travel a thousand miles from home and help build schools and feed starving children in a foreign land, without getting paid any monetary compensation, the organization can pay for my plane ticket, and provide housing and food for me while I am working as a volunteer. This does not necessarily transform the value of the travel, housing and food into taxable compensation.

The travel, housing and food is arguably nontaxable to the extent that it is incidental to the work I am doing. On the other side of the equation, it is an ordinary and necessary business expense of the organization. In the "normal" corporate world, we might call it meals and housing provided for the convenience of the employer. But in this case, the organization is not an employer, and the volunteer is not an employee.

This is not much different than a volunteer for the Peace Corps. Someone is going to object and say, "No, that's different. The Peace Corps is a government agency." Doesn't matter. The principles are the same.

I'll see if I can find some concrete authority on this issue.

One more observation: Your client is not a pastor. And I don't think all those complicated rules pertaining to to clergy are applicable here. The term pastor refers to an ordained minister who leads a congregation at a house of worship. If your client is not ordained, then he is not clergy. You are not dealing with a housing allowance.

BMK

[Burke]

Bonnie--

You may be dealing with a gray area of the law, or a set of facts and circumstances that is open to more than one interpretation.

A charitable organization can, in certain circumstances, provide housing, food, transportation and other living expenses to someone who is working for the organization as an unpaid volunteer.

One more observation: Your client is not a pastor. And I don't think all those complicated rules pertaining to to clergy are applicable here. The term pastor refers to an ordained minister who leads a congregation at house of worship. If your client is not ordained, then he is not clergy. You are not dealing with a housing allowance.
BMK

In my case cited above, the missionary was an ordained minister. Even if classified as housing allowance, it was taxable for SS purposes, IMO. And this was not a temporary assignment, which I may have treated quite differently. He intended to stay in the foreign country permanently. He returns to the US every year for short periods, vacation, the birth of his children, etc.

[Bonnie]

Actually yes he is an ordained minister

[Koss]

Minister

Actually yes he is an ordained minister

That's interesting, but I still say that a bona fide nonprofit organization can provide housing, food and transportation to its volunteers while they are performing volunteer work, and that this is not treated as compensation.

Was your client taxed as clergy before he started the missionary work?

BMK

[Bonnie]

He wasn't taxed as clergy before because even though he was ordained and did preach occasionally for the local church it was always volunteer and never for compensation. He had a job as a Real Estate agent that his income came from and his wife worked. I kinda agree that he is just doing volunteer work while in Honduras. Needed other input. I have no problem filing tax return if he needs to as with his standard and exemptions non of it would be taxable, just the formality of filing. The question was from the church that his 501c3 falls under as to if they need to issue a 1099 or if his own 501c3 needs to issue one to him. Once we determine that doing his return will not be an issue. We are just trying to make sure if there needs to be a 1099 that it gets issued but feeling like it's not necessary.

[MAMalody]

<<<This was all planned for several years. The 501c3 he created falls under his church.>>>

What does this mean? It sounds like the church is in controll of the 501(c)(3) he created. If it falls under his church that would tend to indicate that the church sent him.

<<<The term pastor refers to an ordained minister who leads a congregation at a house of worship.>>>

The term pastor is normally granted by a church to one who "pastors" the church, regardless of whether they ordained or not.

<<< If your client is not ordained, then he is not clergy.>>>

Many clergy are not ordained.

[Bonnie]

He is ordained, I was at the church service when he got ordained.