Let's consider an example of abuse. Rather than a family member making a direct payment to a medical provider on behalf of another family member (step 1) that person makes a "contribution" to the church (step 2) which subsequently pays the medical bill. The “step transaction doctrine” permits the IRS by statute to compress these steps into a single, nondeductible action thus defeating the tax avoidance strategy.
- It is not advisable for churches to keep currency on hand to meet benevolent needs. Benevolent collections should be deposited to the bank and disbursed as needed by check.
- Churches should have a process to allow members the ability to communicate a need to a pastor, deacon, or other church leader.