Employee vs. 1099 vs. "Department Expense"

[isaiahvi]

I would like to know how others are handling payment for individuals who are not Employees (W-2) of the church.

1. We give $100.00 every Sunday to the Prison Ministry Chaplain to help him with cost of gas and lunch for his visits to the prisons, etc. Over the course of the year it would amount to about $5,200.00 given to this individual. No receipts involved, but just a set amount the board agreed to give him every week. Should this be considered as a 1099 or expense under an outreach?

2. We give $150.00 every month to an individual for cleaning the church. Over the course of the year it would amount to about $1,800.00 given to this individual. No receipts involved, but just a set amount the board agreed to give him every month. Should this be considered as a 1099 or expense under an building maintenance?

3. We give $200.00 every month to an individual for landscaping the church. Over the course of the year it would amount to about $2,400.00 given to this individual. No receipts involved, but just a set amount the board agreed to give him every month. Should this be considered as a 1099 or expense under an grounds maintenance?

Any help is much appreciated!

[NeilZ]

I would like to know how others are handling payment for individuals who are not Employees (W-2) of the church.

1. We give $100.00 every Sunday to the Prison Ministry Chaplain to help him with cost of gas and lunch for his visits to the prisons, etc. Over the course of the year it would amount to about $5,200.00 given to this individual. No receipts involved, but just a set amount the board agreed to give him every week. Should this be considered as a 1099 or expense under an outreach?

This is kinda of a gray area. It could be outreach of a sort, but because you don't have a system of tracking the actual costs, the IRS could consider this money as income rather than a reimbursement for travel. This is something you need to check with a tax professional.

2. We give $150.00 every month to an individual for cleaning the church. Over the course of the year it would amount to about $1,800.00 given to this individual. No receipts involved, but just a set amount the board agreed to give him every month. Should this be considered as a 1099 or expense under an building maintenance?

This person should be considered a 1099 vendor for the purposes of taxes. It is an expense, and so you would create an invoice in Accounts Payable for this individual, with the building maintenance expense line listed. At the end of the year he should get a 1099.

3. We give $200.00 every month to an individual for landscaping the church. Over the course of the year it would amount to about $2,400.00 given to this individual. No receipts involved, but just a set amount the board agreed to give him every month. Should this be considered as a 1099 or expense under an grounds maintenance?

Any help is much appreciated!

This person also falls under the 1099 rule. There are no invoices being handed out, but since he is working for the church, and the board has decided to pay him what is basically a salary, not handing him a 1099 or making him an employee could cause the church problems under income tax withholding laws, both Federal and state.

Again, this advice is just an accumulation of experiences we've seen over the years, and what has been brought up on the forums. You should check with a tax professional to verify these suggestions.

[beas]

FWIW, make sure you check with your tax professional to see if these people actually meet the IRS criteria for employees even though they are part-time. If so, you should probably be treating them that way and paying them through payroll and withholding at least FICA and MC.