Skip to main content

Gifts to Church Employees

By
Question:

 Can a congregation give gifts to its employees on a tax-free basis?

 Answer:

 Yes and no...

 The Rest of the Story:

 Internal Revenue Code Section 102(c)(1) prohibits the exclusion "from gross income any amount transferred by or for an employer to, or for the benefit of, an employee." However, IRC Section 132(e) offers an exception for "de minimis fringe" amounts, defined as "any property or service the value of which is (after taking into account the frequency with which similar fringes are provided by the employer to the employer's employees) so small as to make accounting for it unreasonable or administratively impracticable."

 A Reveune Ruling by the IRS clarified this for holiday gifts: Gifts of minimal value that are provided by an employer to its employees may be excluded from the employees' incomes if the gifts have little value and are not readily convertible into cash. "The value of a turkey, ham, or other item of merchandise of similar nominal value, distributed by an employer to an employee at Christmas, or a comparable holiday, as part of a general distribution to employees engaged in the business of the employer as a means of promoting their good will, does not constitute wages" (Rev. Rul 59-58).
Labels:

Comments

Post a Comment

Popular posts from this blog

Rental of a Church Parsonage to a Non-Minister

By
Question: A church owns a parsonage, but the pastor does not use it as he owns his own home. The church rents the parsonage to a tenant other than a minister or employee of the church. Will the church be responsible for paying income tax on these monies as Unrelated Business Income (filing a Form 990-T) even if the money is used to carry on the business of the church? Answer: Whether the money is used for church purposes is irrelevant.  IRS Publication 598  states: "If an exempt organization regularly carries on a trade or business not substantially related to its exempt purpose, except that it provides funds to carry out that purpose, the organization is subject to tax on its income from that unrelated trade or business." Fortunately, in the case of rental income from real property, such income is "excluded in computing unrelated business taxable income" (Publication 598). Caution: see content below regarding debt-financed property.  However, a second concern not a...
Post a Comment
Read more

Debits and Credits for Designated Gifts

By
Question: A church is setting up QuickBooks for its accounting, but its personnel have little experience with fund accounting. What are the entries for the receipt and disbursement of designated gifts and the opening balances? Answer: We recommend that most churches that do not need to present financial statements in accordance with Generally Accepted Accounting Principles (GAAP) observe the following steps. Even those churches that do report using GAAP can employ these methods but must make some adjustments when preparing their financial statements. What we will demonstrate relates to what most churches call "designated gifts" (CPAs call these  Temporarily Restricted  gifts). These are gifts that donors contribute with the intention that the church will spend the funds as they direct. Most churches do not receive "endowment gifts" in which donors prohibit the expenditure of the core gift (CPAs call these  Permanently Restricted  gifts). Only earnings on the subsequ...
12 comments
Read more

Departing Pastor Gift (or is it Compensation?)

By
Question: I have a question concerning the taxability of a “love gift” given to a departing pastor after he has left the church. We have been told by our convention that if the church follows certain steps, a gift made after the minister’s final day of payment for services will not be taxable to the minister. The requirements include being voted on by the church, given after the minister’s final day of payment and completely voluntary on the part of the membership and including information in the churches minutes. Answer: The IRS "Minister Audit Technique Guide" available at the following link is particularly helpful in answering questions such as these: Minister Audit Technique Guide I cite here a few sections from the guide, but more information is available there--particularly in the section with the heading, "Gift or Compensation for Services." "There are numerous court cases that ruled the organized authorization of funds to be paid to a reti...
Post a Comment
Read more