Taxpayer asks:
I have a difficult situation. I won a lot of money in my church’s 50/50. I know I have to report it as income but when I asked for written information from my church, they asked me not to report it. They say they aren’t legally allowed to run a 50/50 and if I report it, I’ll get them in trouble and they could have to close. I don’t want to get anyone in trouble but I don’t want to cheat on my taxes. What do I do?
Taxgirl says:
You’re absolutely right that you need to report the income. So good on you.
As to the church, this kind of thing happens all of the time. Many organizations are barred by state law from conducting “games of chance” and other random lottery type fundraisers. And the 50/50 is just that: everyone pays into a pot and a random winner takes 50% and the church or other organization takes the remainder. It’s a win-win for the church or other organization because it requires no upfront cash, no real efforts beyond promotion. There’s just that little detail of whether it’s allowable…
The good news in your case is that you don’t have to have a form from the church in order to report the income. Just report it on Line 21 as other income. The IRS asks you to describe the type and amount – it doesn’t actually require you to name the source.
All of that said, it’s not beyond the realm of possibility that you could be asked, at audit, to provide the source of the funds. In that event, do it. The church is clearly aware that what they’re doing is wrong and they’ve made the decision to do it anyway. That’s not on you, it’s on them: any of the fall out resulting from the 50/50 is the result of their calculated risk. And so long as it’s working for them, they’ve decided to keep doing it. Again, not your problem.
So go, enjoy your winnings. Don’t waste another moment worrying about it.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
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Last month, a delegate from Galveston County, Texas presented a proposal to the Republican National Convention to revoke tax exempt status for the Church of Scientology.
Here is the Resolution:
The Resolution
Initiative for Texas Resolution Calling for the revocation of the Church of Scientology’s status as a Legitimate religion in the sate of Texas.
Be it resolved that the Church of Scientology in the state of Texas no longer be recognized as an official religion, thus revoking its religious tax exempt status in the state of Texas.
In order to preserve Scientology’s religious tax exempt status in the state of Texas an organization must meet objectives in order to qualify. They are listed in the following statements:
1.) The organization must have an official statement of Faith. The church of Scientology has no such statement.
2.) The organization must have some form of routine worship service. The church of Scientology has no such routine.
3.) Church services must be open and freely available to the public. The church of Scientology requires its members to pay an amount equal to or greater than 15,000 U S dollars and to be subjugated to months of mind altering auditing sessions in order for a member to obtain the information regarding the teachings of Scientology. Members who complete these courses are forced to sign agreements not to inform either unpaid/unaudited members or the general public of the teachings of Scientology.
Be it resolved that the church of Scientology in the state of Texas be officially regarded as a business and not as a religion.
Resolution adopted this twenty-ninth day of March, 2008, at the Precinct Convention of Precinct Number 341, and/or senatorial district 11 Convention, Galveston County, Texas of the Republican Party of Texas.
Hmm. This is certainly an interesting development as the Church of Scientology has had its share of battles with the IRS over the years regarding tax exempt status. In 1993, the Church of Scientology paid the feds $12.5 million as part of a settlement to obtain tax-exempt status. The details of the settlement have not been made public but reportedly included a special “church tax-compliance committee” and an agreement not to sue the IRS for pre-1993 claims.
The Church has been in existence since the 1950s and was established by author L. Ron Hubbard. The Church claims membership of between 8 and 15 million people worldwide. Famous Scientologists include Tom Cruise, Katie Holmes, Lisa Marie Presley, Kirstie Alley, Leah Remini, Beck and John Travolta – Tom Cruise and Katie Holmes actively promote the Church.
The IRS had previously denied status to the Church on the grounds that the Church was a “for profit” business – countries such as Germany have continued to deny tax-exempt status to the Church for similar reasons. The church reacted with a barrage of lawsuits. It will indeed be interesting to see if, in the event that Texas was to make this resolution the law, a similar end would happen in Texas. What do you think will happen?
