Benevolence Gifts

A friend asked me what the IRS rules are regarding benevolence gifts to help people. I mean, if someone is in really, really dire straits, don’t they get an exemption from having any tax consequences if they get some money from a church? The church can give it directly to the individual, but the church has to prove that the person is really in need and know that the gift will be used exactly as intended. There is a better and easier way which is to pay someone’s rent/mortgage, groceries, medical bills, etc.

  • Payments made to an individual are considered taxable income unless there is a provable expense or personal need. BTW, the IRS doesn’t care what you call it – love gift, honorarium, salary, bonus, wages, stipend, gift card, etc. – to them it is all income, pure and simple, and is thus taxable as income.
  • If you pay someone $600 or more in a calendar year, then you must provide a 1099 UNLESS that is documented as a reimbursable expense such as mileage, travel, program expense, etc., etc. That means that all gifts and fees for services are considered taxable income. It doesn’t matter how serious the need is by the person or family. If you give them $600 or more in cash, it is taxable income to them.
  • The only way around this is to make a payment on someone’s behalf to another organization. This includes paying someone’s mortgage, rent, utilities, car repair, medical bill, etc. The church gets the invoice from the organization and pays it directly. The money never goes through the hands of the individual – it goes from one institution to another institution, just like any other accounts payable paid by the church.
  • The IRS is concerned that all benevolent funds be under the authority and control of the tax-exempt organization and that the church not be used as a conduit for personal purposes or gain. Thus, you cannot give money to your family or anyone else by “running it through the church” or you’ll jeopardize the church’s tax-exempt status.

Lead On!