IRS Requires 30% Withholding on Love offerings to Foreign Guest Speakers!
By Raul Rivera
Churches Must Withhold 30% on Love Offerings Paid to Foreign Guest Speakers!
Most churches support missions and often times have foreign nationals speak at their church. Whether it be a missions conference or a special service, the love offering, or honorarium paid to the foreign guest speaker, is subject to a Non-Resident Alien withholding of 30%. Ouch! This means that the church is required to withhold 30% of the honorarium, and then it must be sent to the IRS. Most churches in America are not aware of such laws and face fines and penalties for not complying with these requirements.
If Done Correctly, There Is An Exemption!
Revenue Procedure 2005-44 clearly states that the church must withhold taxes from any individual that performs services for the church. However, if the foreign guest speaker applies for a tax payer identification number using form W-7, and properly fills out IRS form 8233, he/she may be eligible to claim an exemption under a U.S. treaty provision. This form will ask for their Visa type and Passport number. The form will also ask the individual to list their country and what tax treaty applies that makes their love offering or honorarium exempt from withholding. Publication 515 has a long list of countries that have tax treaties with the U.S. If their country appears on the list, they can claim an exemption according to the tax code and treaty. The good news is that it is simpler than it sounds!
What If Their Country Is Not Listed?
If the country where the foreign guest speaker resides in is not listed, like Nigeria, the church must collect the offerings, and by law, withhold 30% to send to the IRS by the 15th day of the next month. You can do this using Form 8109, or the online EFTPS. Additionally, by February 2nd of the next year, the church has to file Form 945 with the IRS.
What if Your Church Sends Support to a Foreign National?
Many churches send support to foreign nationals. For example, a church that I am consulting sends weekly support to a Colombian pastor, who is also a Colombian citizen. The pastor receives the support to continue his work of establishing the church in Colombia. Under scenarios like these, the tax code allows the Colombian pastor to receive the support without the church having to withhold 30%. Why? The tax code states that the requirement to withhold only applies if the compensation was for work done in the U.S.
Ministry today is not what is was several years ago.
Ministry is not what it once was. We have experienced significant changes when it comes to managing ministry business. Juggling tax laws from the state and the IRS can be a little discouraging, and sometimes it can also bring about fear. Over the years, I have learned that the best way to combat fear is to become educated.