Churches bear many responsibilities behind the scenes of planning, packing, and serving on short-term mission trips. One of the most important is managing the contributions that will pay for the trip. To avoid tax trouble and remain in compliance, make sure you follow these 5 rules:
- Mission trip funds must be processed by the church, and the trip must meet the requirements for charitable travel.
- Funds to pay for mission trips may come directly from the participant, be solicited by the participant from outside sources, and/or come from church-sponsored fundraising activities.
- It is very important that funds not be designated solely for a specific participant, regardless of the fund raising method.
- Fund raising materials, such as solicitation letters, must state that if the designated participant is 100% funded, then the donation will be used for other participants, trip expenses, or future mission trips. Donations are not refundable.
- If there is a group fund raising activity, members of the group can’t ‘claim’ any portion of the funds to be designated. If any funds are designated, the IRS considers this ‘paying’ an individual to work, and the person is in effect an ‘employee’ of the church. Group activities benefit the entire trip.
Mission trips are win-win-win situations for the receivers of aid, participants, and the church. Follow the IRS rules closely to avoid spoiling the good that is accomplished. Please contact a Salmon Sims Thomas tax advisor with any questions.