Skip to main content

Accountant's New Church Checklist

There are a lot of church planting websites with ideas and services offered to church planters. But what list might an accountant provide for a new church to consider?

Initial Budget

Prepare a budget forecasting both outside support and initial giving by the families expected to charter the new church. Determine the pastoral compensation level that the new congregation can realistically provide. Project costs for meeting facilities (secure a lease). Use church planting resources to develop proper strategies for initial communication and outreach; project the costs to implement the strategies and adjust based on the realities of financial resources.

Organization

Establish a constitution and by-laws. Incorporate with counsel of an attorney familiar with laws for tax-exempt organizations in the state.

Pastor Compensation

Work with the pastor to establish a wise compensation and benefits package. Consider establishing a professional expense reimbursement plan, either using an “advances” or a “reimbursement” arrangement. Determine health insurance and medical care benefits, including the possible use of a major medical policy combined with a Health Reimbursement Arrangement (HRA). Consider retirement funding, typically either contributing to his Internal Revenue Code 403(b) plan or providing funds for the pastor to fund his own Roth or traditional IRA. Designate a portion of cash compensation as a housing allowance. Determine remaining cash compensation. 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). Assign responsibility for government reporting including quarterly (Form 941), if necessary, and annual employment filings (Forms W-2, 944, 1099-MISC and state, if necessary).

Financial Procedures
Adopt a process for establishing the church budget (projecting revenues, compensation planning and communication, categorizing expenses by activity or functional, establishing a contingency fund). Establish policies and procedures for 1) offering counts, 2) disbursements / purchasing, 3) bookkeeping (fund accounting for general and designed gifts), 4) missions and other special funding methods, 5) financial reporting (determine frequency, recipients, and contents — balance sheet (modified cash basis of accounting), statement of receipts and disbursements (modified cash basis of accounting), and other schedules (e.g. mortgage schedule, designated funds activity), 6) internal auditing, 7) maintenance of donor records (Answer: who will record donations? what software, if any, will be used? what reports will be provided to donors?), 8) benevolence, and 9) records retention (church minutes, financial documents). Determine qualifications for church volunteers who oversee bookkeeping records. Purchase and implement accounting software; establish chart of accounts consistent with church budget determinations.

Insurance

Determine need and pursue quotes for liability, auto (if necessary), workers' compensation (employee and subcontractors), and professional liability (counseling).

Miscellaneous
Pursue sales tax exemption certificate from the state government. Discuss philosophy of church leadership regarding use of debt for church capital expenditures.

Comments

Popular posts from this blog

Review: Form 1099 Payments to 501(c)(3) Organizations

Question: A church rented space from another church last year. Should it request a completed Form W-9 and issue Form 1099-MISC? Answer: Payments from one 501(c)(3) organization to another 501(c)(3) organization are not subject to Form 1099-MISC reporting. The IRS Instructions for Form 1099-MISC state that "payments to a tax-exempt organization" are exempt from reporting a Form 1099-MISC.  The following are typical examples of payments of $600 or more by a church which are subject to reporting a Form 1099-MISC: Rent paid to an individual (non-corporation) Payments for services rendered by individuals who are not employees (e.g. janitorial service, facilities, snow removal, guest speakers) Support sent directly to missionaries

Special Topic: U.S. Olympic Champion Ben Peterson's Autobiography "Road to Gold"

Road to Gold , by Ben Peterson We are privileged to serve our client Ben Peterson and Camp of Champs, the wrestling ministry he founded   and directs. Ben wrestled for more than 16 years, coached on a collegiate level for 28  years, and has directed Camp of Champs for more than 40 years. We have read his autobiography and found Ben's dedication to the sport and his faith to be inspiring. If you are looking for a good story we highly recommend Ben's  Road to Gold. In Road to Gold , Ben shares the lessons he learned throughout his upbringing and how they led him to achieve Olympic victory. Ben states a key element of his youth was the consistency of his parents. He was encouraged to read the Bible every day from an early age, which he now describes as the most stabilizing habit in his life. Throughout his story Ben also emphasizes the importance of confidence, solid goals, hard work, and consistency. These qualities helped Ben throughout his life and wrestling career, from learni

When you don't know what you don't know

Here at MinistryCPA, we recognize that many churches rely on volunteers and/or part-time treasurers and financial secretaries.  With this in mind, we seek to come alongside ministries in providing the much-needed support to ensure that they are operating in a manner that is both compliant with governing authorities and taking advantage of opportunities for improved stewardship of ministry and employer financial resources.  Please consider this brief checklist to determine if your ministry needs to look further into areas that could be classified as “We don’t know if we are compliant.” Please check all compliance requirements that are currently being met: File quarterly Form 941 or annual Form 944 with the IRS Issue Forms W-2 to all employees and File Forms W-2/ W-3 with SSA Ministerial Housing Allowance is only listed in box 14 of the Form W-2 – it is not included in box 1 Obtain Form W-9 from all individuals/businesses that are paid the cumulative total of $600 or more in the year f