August 27, 2013
Q&A: Our Pastor Died—Can We Financially Help the Spouse?
Be aware of how the IRS views aid to employees' family members.
Q: A pastor passes away. The church wants to give the widow a small amount of monthly income for the remainder of the year. How is this gift treated from a tax standpoint?
A: It is best to treat this as taxable income in recognition of the pastor's services. Churches cannot make nontaxable "gifts" to persons, although they can distribute funds for charitable or benevolent purposes (it is unlikely that a pastor's spouse would qualify for this unless the spouse is destitute).
I provide specific guidance on employer-provided relief to employees and family members of employees on pages 407 and 408 of the 2013 Church & Clergy Tax Guide. This guidance includes the specific criteria that must be met in order for the IRS to consider assistance to be benevolence, rather than taxable income.