Our arrangement with the missionary, in general
- We will assure timely payment of support every month.
This is a big deal. If you’re the sponsoring church, it’s your job to get the missionary’s money to him or her on time every time. Now, you may be counting on other churches to provide part of the support and so may not be able to provide full funding until the other checks come in. But pay what you can on time.
And if you can afford it, cover the float while waiting on other churches to get their checks in on time. And if they routinely miss deadlines, talk to them. Your missionary has to pay bills, buy groceries, etc. like anybody else. The church is likely far better able to cover the timing differences than the missionary.
I mean, would you let the preacher or church secretary wait two or three weeks to get paid just because a major contributor was out of town and failed to drop a check in the plate? No, you’d go to the bank or dip into reserves and cover the payment.
Now, if the supporting congregations are routinely irresponsible — which I’ve never seen happen — the missionary may have to suffer a pay cut until further support can be found. But in the meantime, pay those who labor in the vineyard on time, every time, if at all possible.
If we are the supporting congregation —
Taxes
- We will advise supported missionaries on the tax consequences of their support.
Many missionaries are kids scratch out of college. Others are former youth ministers or preachers who’ve never made much money. None is likely to be sophisticated when it comes to taxes — and yet U.S. and foreign taxes can be quite large.
Several years ago, the European authorities caught several Church of Christ missionaries not paying their taxes. This is, you know, sin. It’s also a felony. But I’m sure no one bothered to tell them that U.S. citizens aren’t necessarily exempt from foreign taxes (depends on the terms of the tax treaty).
Now, I’m a tax attorney with 35 years of experience, and this stuff isn’t easy for me! Most CPAs and attorneys find it impossibly dense. I just happen to have studied these questions over several years because of my church work, lecturing, and blogging. In fact, many tax professionals get this stuff wrong.
Therefore, I’ve posted what little I know, with links to the IRS publications that address the issues, and I’ve posted answers to questions all along. And so, if nothing else, refer your missionaries to the articles at the link. Don’t force them to figure this out on their own. It’s not possible for someone who’s not a tax professional.
- Work funds will be accountable funds or else treated as 1099 income. To be an accountable fund, the missionary must justify his use of the funds with receipts no less often than monthly.
I just posted something on this. Work funds are income to the missionary unless accountable — meaning that they must demonstrate to the church that they spent the money on legitimate ministry expenses.
Many churches don’t want to go to the trouble or else feel uncomfortable holding a man of God accountable for how he spends donated money. Some figure the money was really donated to the missionary. All these are profoundly wrong attitudes.
You owe God, the donors, the IRS, and the missionary a duty to make sure money donated for expenses is legitimately spent. Nothing else will do.
- Missionaries will treated as independent contractors for tax purposes
On balance, it’s both right and better for missionaries to be treated as independent contractors rather than employees. The theoretical distinction is based on day to day control, and certainly a US church has little day to day control of a foreign missionary. They set their work day quite on their own, as a rule.
And this is good. You see, if a missionary is an employee of the church, at least these problems arise —
* The expenses of doing ministry are deductible as itemized deductions only, which are subject to limits and aren’t deductible at all for alternative minimum tax purposes.
* If the church has a retirement plan or health plan, the missionary is an employee and so likely covered by the literal terms of the plan. But an Alabama Blue Cross policy won’t do a missionary in Japan much good. None of the Japanese health facilities are in the plan.
* The church is required by law to withhold taxes and pay matches, even though much of the pay will be tax free to the missionary for US tax purposes.
* If the missionary is a church employee, the church will be subject to the laws of the missionary’s work, meaning a US church could be guilty of a felony for failing to pay Guyanan employment taxes or could be sued in a Guyanan court.
- We will work with the missionaries to make annual housing allowance declarations under IRS standards
Missionaries will easily qualify as ministers of the gospel (the job description should say so), and so they’ll qualify for the housing allowance. This means the portion of their pay designated as a housing allowance will be US income-tax free to them to the extent used to provide housing — and housing is often quite expensive in foreign lands.
But the housing allowance must be declared in advance, in writing. Minutes of a meeting of the missions team or a memo by the church treasurer is enough — but some formal action is required at the beginning of the year for this to work.
- We will advise missionaries against opting out of Social Security
As we’ve considered here before, I don’t believe ministers in the Churches of Christ can make the oath required to be exempt from the self-employment tax (Social Security) on their income. Many make this election, but I don’t see how they do it.
The law requires that the minister take an oath that he is conscientiously opposed to the receipt of government benefits. Opting out for purely economic reasons is not permitted. It must be a matter of doctrine. You’d have to swear that you can’t receive Social Security benefits in good conscience — and that’s just not true.
Therefore, because Christians aren’t allowed to take false oaths, we counsel our ministers and missionaries against making this election.
- Missionaries are responsible to comply with the tax laws of the country where they work.
We really can’t do much to help the missionary comply with the laws of some foreign land. We can point them to the tax treaty that governs whether they are under US or foreign tax law. And if they are under foreign tax jurisdiction — which is typically the case — it’s up to them to comply. We just need to point out that being a US citizen does not automatically exempt you from the law of land where you live.
