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Q&A: Is Benevolence for a Church Employee Taxable?

Important information to address this common tax question.

Can a church give a cash benevolence gift to an employee? And is it taxable income?

Yes and yes.

For better or worse, churches seem to attract needy employees. They may need their car repaired or have serious uninsured medical expenses. The Internal Revenue Code requires all benevolence payments provided to employees be taxed. The church must add the amount of the benevolent payments to the employee's Form W-2, and if nonclergy, withhold all payroll taxes like the payment was wages. It makes no difference if the payment is direct or indirect, like to the employee's doctor.

As a result, "love offerings," pastoral appreciation gifts, Christmas gifts, anniversary gifts, and birthday gifts that flow from the church to the church employee's are always taxable. Even retirement gifts are taxable to the recipient. No exceptions to this rule exist.

If the church pays a benevolence ...

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Frank Sommerville is an attorney and shareholder in the law firm of Weycer, Kaplan, Pulaski & Zuber, P. C. in Houston and Dallas, Texas, and an Editorial Advisor for Church Law & Tax.

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Posted:
  • July 19, 2012

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