Tax Law (Questions About Taxes)/Revenue Ruling 64-326

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Question
I am a church volunteer looking to hire an licensed pastor/singer entertainer for a one-time church engagement.  He sings and plays guitar but I don't think there is any formal message or sermon. He is a local resident but has asked for a third of his fee to be allocated as a housing allowance.  I am aware that this lowers his 1099 income, self employment tax, etc.  Questions: 1) Is this appropriate given his local proximity?
2) Is it appropriate given that we do not consider this a guest pastor but primarily a Christian themed entertainer?
3) If yes to the above, is a third of the total fee an appropriate amount?  (The church would still issue him a 1099 for the unallocated portion).
Any insight would be appreciated.  Thanks

Answer
Ken,

Thanks for your question.

1. Yes, you may provide a portion of the fee as housing allowance. The fact he is local is of no consequence in this case.

2. This is not really a factor here. He is leading in worship, which does not have to include a "sermon."

3.One-third is certainly appropriate. It is his responsibility to determine how much of his housing allowance is to be excluded based on his housing costs. Your responsibility is just to designate the amount.

The housing allowance must be designated in advance by an appropriate body of the church. There is no place on the 1099 to show the housing allowance, so a separate statement should be included, indicating how much housing allowance was paid. The 1099 should reflect only the amount not designated as housing allowance.

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

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I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

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FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

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The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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