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A church issued a Form 1099-Misc for a $5,000 gift given to an individual that suffered a life threatening accident to help her with therapycosts. Is this correct? Should this gift be taxable at a regular rate?
Form 1099-MISC is used to report compensation to individuals not under the employ of the issuing organization. If no services are or will be required for the $5,000 benevolence gift listed in the question above, then this amount should not be reported on Form 1099-MISC and will not be reported as taxable income by the recipient. According to IRS Publication 525, gifts to individuals not in the employ of the donor are non-taxable. A corrected Form 1099-MISC should be prepared immediately.
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