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Nonprofit Law/Love Offering for Family

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Question
QUESTION: If a church congregation collects monetary donations for a family that has lost a child to help off set the cost. Then the church gives the funds collected as a "love offering" to the family should the family that received the love offering be required to claim the "love offering" as income?

ANSWER: The Internal Revenue Code at section 102(a) provides that gifts are not income.  "Gross income does not include the value of property acquired by gift..."
http://codes.lp.findlaw.com/uscode/26/A/1/B/III/102

However, section 102(c) of the Code has "Subsection (a) shall not exclude from gross income any amount transferred by or for an employer to, or for the benefit of, an employee...."

Therefore, if no one in the family is an employee of the church congregation, then the money received is not declared as income, because it is not income.

Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather more information.

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QUESTION: Is there anything that the family who received the "love offering" can do if they are being contacted by the IRS because the church filed a 1099 for the donations they received?

ANSWER: I suggest that the family first ask the church to file a correction to that 1099-Misc. and, if the chruch does not do so, then what I advise is that the family, in their 1040 return for the year, put in a note why they are not including that amount as income.

Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather more information.

---------- FOLLOW-UP ----------

QUESTION: What if this incident took place in 2014 and the IRS has contacted the family and is now wanting the family to pay income taxes due to the 1099 filed by the church. Is the church responsible for making the correction to the IRS or does the family need to contact the IRS directly to explain the situation?

Answer
The church is supposed to be responsible but if they do not act properly then certainly the family would want to answer the IRS request for payment by explaining that that 1099-Misc was issued in error by following the procedure explained at http://goo.gl/rGbh0j

I have in my profile that this free forum is only for general questions about IRS federal exemption issues of 501(c)(3) organizations.  Actually this issue is not about exemption, but I was willing to answer a few questions.  If you want me to work further on this matter, it would take me a substantial amount of time and I would charge a fee, based upon a sliding scale as to your income.  If you want to hire me, send me an email directly to my email address below.

Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather more information.

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Harvey Mechanic

Expertise

I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at Harvey108@hotmail.com I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.

Education/Credentials

B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.


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