When working as a Minister for weddings, funerals, baptisms or other speaking engagements, it is common to receive payments as gratitude. The payments for these services are collectively referred to as honoraria.
Some Ministers do not wish to receive any money for their service, so they donate the money they receive to the church or to charities. They may not realize it at the time, but how they donate the money could have a big impact on their tax return at the end of the year.
For example, if a Minister receives $500 and puts it into his bank account, that $500 becomes taxable income to him. Even if he immediately donates that $500 to charity, IRS still believes he must report and potentially pay tax on that $500 because he had control over the funds. Worse, he might not even receive a charitable deduction for it, depending on whether he itemizes or not.
If you do not wish to claim Honoraria donated to charity as taxable income, the safest bet is to have the person giving you the money to donate directly to the church or charity. If the money never passes through your hands or through your bank account, this will help to prevent IRS perceiving that the income was controlled by you.
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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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