Small Church CPA: Taxable Gifts to Pastors and Employees

Small Church CPA: Taxable Gifts to Pastors and Employees
Hello!  My name is Kathy Holt.   I am a small church CPA.   I am going to explain taxable gifts to pastors and employees and why it should be included in the employee’s wages.  Many churches enjoy blessing their pastor and other employees with gifts of cash or a check at Christmas time.
This is a wonderful idea that shows your appreciation!   However, it is important to realize that per IRS Publication 15, any gift given to an employee is taxable income to the employee.  This amount is to be reported in the employee’s wages and included on their Form W-2.  For lay employees, gift checks should be treated as payroll checks with social security and Medicare deducted from the check. For pastors, gift checks should also be treated as payroll checks.  However, no federal tax deductions are required.
It is important to be aware that giving gift cards is the same as giving cash and is taxable income to the employee ,no matter how big or how small the amount.
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For more information and videos about pastor salary, taxable gifts, small church accounting or church payroll please visit our website below – or call to talk with an accounting specialist.