Can you provide a checklist of items for a new church to consider?
Pastoral Compensation Issues:
1. Consider establishing a professional expense reimbursement plan, either using an “advances” or a “reimbursement” arrangement.
2. Determine health insurance and medical care benefits, including the possible use of a major medical policy combined with a Health Reimbursement Arrangement (HRA). Two key questions to resolve regarding an HRA—what annual amount? and will any unspent amounts carryover?
3. Consider retirement funding, typically using either a 403(b) plan to providing funds for the pastor to fund his own Roth or traditional IRA
4. Designate a portion of cash compensation as a housing allowance.
5. Determine cash compensation. It may not be wise to reduce this amount too low (by providing other benefits instead of cash compensation). Pastors need $11750-$17400 (2007 amounts) for maximum Earned Income Credit (EIC) with 2+ children or need $8350-$16000 (2007 amounts) for maximum EIC with 1 child.
6. Determine whether the pastor desires to elect optional income tax withholding, especially if he has a large amount of Self-Employment tax to pay (tax law does not permit churches to withhold and match the 7.65% FICA tax that most U.S. employees are subject to).
7. Assign responsibility for government reporting including quarterly (Form 941) and annual employment filings (W-2; Form 944).
Ministry Management Issues:
1. Adopt a process for establishing the church budget (a. project revenues, b. disclose compensation, c. categorize expenses by activity or functional, d. establish a contingency fund)
2. Establish policies and procedures (a. for offering counts, b. for disbursements / purchasing, c. for bookkeeping [1) Fund Accounting and donor designations, 2) missions and other special funding methods], d. for financial reporting [1) determine frequency, 2) determine recipients, 3) determine contents {a) balance sheet (modified cash basis of accounting), b) statement of receipts and disbursements (modified cash basis of accounting), c) other schedules: mortgage schedule; designated funds}])
3. Arrange purchase of insurance (a. liability, b. auto, c. workers' compensation (employee and subcontractors), d. professional liability (counseling))
4. Determine legal organization (tax-exempt status; sales tax exemption)
5. Establish policy for internal auditing
6. Adopt policy for maintenance of donor records (a. who will record donations, b. what software, if any, will be used)
Pastoral Compensation Issues:
1. Consider establishing a professional expense reimbursement plan, either using an “advances” or a “reimbursement” arrangement.
2. Determine health insurance and medical care benefits, including the possible use of a major medical policy combined with a Health Reimbursement Arrangement (HRA). Two key questions to resolve regarding an HRA—what annual amount? and will any unspent amounts carryover?
3. Consider retirement funding, typically using either a 403(b) plan to providing funds for the pastor to fund his own Roth or traditional IRA
4. Designate a portion of cash compensation as a housing allowance.
5. Determine cash compensation. It may not be wise to reduce this amount too low (by providing other benefits instead of cash compensation). Pastors need $11750-$17400 (2007 amounts) for maximum Earned Income Credit (EIC) with 2+ children or need $8350-$16000 (2007 amounts) for maximum EIC with 1 child.
6. Determine whether the pastor desires to elect optional income tax withholding, especially if he has a large amount of Self-Employment tax to pay (tax law does not permit churches to withhold and match the 7.65% FICA tax that most U.S. employees are subject to).
7. Assign responsibility for government reporting including quarterly (Form 941) and annual employment filings (W-2; Form 944).
Ministry Management Issues:
1. Adopt a process for establishing the church budget (a. project revenues, b. disclose compensation, c. categorize expenses by activity or functional, d. establish a contingency fund)
2. Establish policies and procedures (a. for offering counts, b. for disbursements / purchasing, c. for bookkeeping [1) Fund Accounting and donor designations, 2) missions and other special funding methods], d. for financial reporting [1) determine frequency, 2) determine recipients, 3) determine contents {a) balance sheet (modified cash basis of accounting), b) statement of receipts and disbursements (modified cash basis of accounting), c) other schedules: mortgage schedule; designated funds}])
3. Arrange purchase of insurance (a. liability, b. auto, c. workers' compensation (employee and subcontractors), d. professional liability (counseling))
4. Determine legal organization (tax-exempt status; sales tax exemption)
5. Establish policy for internal auditing
6. Adopt policy for maintenance of donor records (a. who will record donations, b. what software, if any, will be used)
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