If any of you know solid answers to IRS questions I have 2 for you.

1 - If a minister prepares a meal in his home for a church get together, such as a couple he is trying to evangelize or the elders, can he deduct, as a business expense, an amount per person for the meal he served equal to what he would get at a medium priced restaurant?

2 - I need IRS verification for this one. Can a church that pays no salary to its preacher provide food to him, such as groceries on a regular basis, but without tax ramifications

-- Anonymous, February 04, 2003

Answers

Bill....

As per number one....don't do it!! This is one of the hugest "red flags" that a preacher can do on his taxes. It hugely increases your chance for an audit. If you are audited....then you will have the hassle of proving these "entertainment" expenses......and all you need is the subjective conclusion of the auditor that he or she "doesn't see it that way" and then you are worse off then if you had just sucked it up. In 21 years....I have never fooled with this.

As per number 2....yes...you would need to pay tax on that as it is considered a gift. You pay tax on it the same way you do any "tips" you get for doing weddings, funerals, etc. The only thing that is "non-taxable" is health insurance provisions (if they pay directly)....and parsonage (including utilities). Parsonage allowance is free of taxes....but you still must pay Social Security taxes (unless you opted out).

Hope this helps.

-- Anonymous, February 04, 2003