No profit motive means no business.

June,

I am currently living in Brazil and working as a volunteer social worker. I'm not in it to make a profit. I'm in it to make a difference. My income consists of donations given from individuals. Some donors send their gifts to a non-profit organization which then deposits that donation into my bank account. In return the donors receive tax exemption for their gifts. The non-profit organization has sent me a 1099-MISC for those donations. Am I obligated to pay the self-employment tax on those gifts or can I just put it in box 21 on my 1040 and go on with my life?

Thank You, Brian


Dear Brian,


You goal is to make a difference not a profit. If your goal is not to make a profit then you are not a business. The IRS says you must pay self-employment tax on profit from a business.

So you must pay income tax on the income, but no self-employment tax. Include the payment as "Other Income" on your tax return.

Remember you may deduct any out-of-pocket volunteer expenses as an itemized deduction.


-- June