User Support Forum

Our church custodian is retiring and the personnel committee has asked that he be given a monetary gift of $1000.00 and they have instructed me to write him a check for that amount. I'm not sure if I did it correctly, however, I made a new item description in Payroll called "gift" and showed it as tax deductible so that necessary taxes be deducted. There were several asking why I just didn't write the check for $1000.00 as a one time gift. With having no experience on this issue, I researched and found that this should be a taxable item and treated it that way. Was I wrong in the way I handled this or should I have given him a check for $1000.00 and told him to show it on his income tax. I thought the way I did it I could include it on his W-2.

Any suggestions?

The way you did it is the way I have done it in the past and would do it this way in the future. You could have given him a check for the full amount but it still would need to be shown on the W2 and would cause problems with the FICA and Medicare deductions that the church is responsible for. What you did is correct and the easiest way to handle these types of payments.

The same is true in Canada. While the church leadership sees the money as a gift, the government sees it as employment income and it needs to be processed just like any other paycheque.

ML

You did the correct thing. Sometimes, we approve an amount greater than the $1,000.00 so that the after-tax check is $1,000.00.