Let's give 3 cheers for Jesus' gifts to the church!!
It is recommended that the church take time to carefully consider when making gifts or payments to volunteers. Whether its called a gift or an honorarium or anything else, amounts paid under certain circumstances could be considered employment income.
If the church is not in a financial position to meet these obligations it should refrain from compensation until another time. If the church decides to proceed then there should be clear communication between the church and the person as to the expectations and obligations that are now a part of the employment relationship.
Below are 2 common scenarios and the recommended course of action:
One Time Gifts Less than $500
If the amount paid is one-time and under $500 in one calendar year then the amount may not be considered employment income. In this case no deductions would be taken and no T4 reporting is required.
If amounts exceed $500 in a calendar year the whole amount becomes taxable as employment income.
Systematic Payments exceeding $500
If the total of gifts in a calendar year is over $500 and/or begin to be paid in a systematic way (ie. weekly or monthly) then it is considered employment income.
All applicable payroll deductions are to be taken and a T4 is to be issued at the end of the year.
Serving with You!