Honorarium or Gift reporting

by Yelrab
(Winchester, VA)

Our church employed a retired pastor to assist our Regular pastor with visitations and occasionally other backup support to the full time pastor. He was employed for several years and was paid via payroll, W-2 issued, etc each year. This part time pastor retired from this position at the end of 2015.

In Feb of 2016 the church held a celebration/reception in honor of his years of service to our congregation. In addition to a physical tangible gift, the congregation had collected a small monetary gift which was also given to him.

My question is how do I handle the cash gift?

I know the IRS considers cash or cash equivalents as income and would normally be reported as such on his W-2. However, for 2016 do I issue a 1099 or W-2? His regular employment ended 2015, but he gift was given in 2016. Would the IRS consider him an employee in 2016 and be included on the Quarterly 941 and be issued a W-2 at the end of 2016? Or should he be treated under the rules of a 1099 and only need to be reported after the threshold of $600 is achieved?

As a 1099 recipient he would not need to be reported on the Quarterly 941 report.

To me this is a gray area since this was a employee for several years. At what point does the employee relationship end as far as the IRS is concerned. Would he only be considered an employee through the end of tax year 2015?

Thank you for your opinion.