MinistryCPA - Corey A. Pfaffe, CPA, LLC

Question: A church or Christian ministry can give up to $13,000 to each employee as a non-taxable gift each year. Right? Answer: The $13,000 exclusion relates to inheritance gifts to beneficiaries prior to an individual's death, not to employer gifts to employees prior to the year end. The gift tax exclusion is $13,000 per year. Gifts above this amount will be viewed as potentially reducing a decedent’s taxable estate and denying estate tax receipts to the government. Most gifts to employees by their employers are taxable to the employee and deductible by the employer. IRS Publication 535 communicates that food or merchandise gifts of “nominal value” are not taxable to the employee. The link provided below especially highlights this context.  Publication 535 Business Expenses   Publication 15 is also helpful as it deals entirely with Fringe Benefits. Especially view, De Minimis (Minimal) Benefits.   Publication 15-B Employer's Tax Guide to Fringe Benef...

Question: What is the proper and legal wording for ministries to put on their statements to donors to indicate that no good or service was rendered for the stated giving? Answer: The IRS Publication 1828 publishes the rules regarding this, and other, legal documents which a church must prepare.  "A donor cannot claim a tax deduction for any single contribution of $250 or more unless the donor obtains a contemporaneous, written acknowledgment of the contribution from the recipient church or religious organization. A church or religious organization that does not acknowledge a contribution incurs no penalty; but without a written acknowledgment, the donor cannot claim a tax deduction. Although it is a donor’s responsibility to obtain a written acknowledgment, a church or religious organization can assist the donor by providing a timely, written statement containing the following information: ■ name of the church or religious organization, ■ date of the contributio...

Question: A church would like to provide housing for its minister after he retires. His retirement is still a few years off. What can the church do now to provide for its pastor after his retirement? The church would rather not use the parsonage to provide for this retirement housing. Answer: Churches hav e a few options worth considering w hen discussing how best to provide for a retire d minister: (1) The c hurch can establish a 403(b) plan for a minister before he retires and make contributions to it. U pon retirement (retired and no longer providing services to the church) , t he pastor can use this to provide for his own housing, if so designated by the church. Following advice provided in other blog postings on MinistryCPA, distributions from the 403(b) account to the pastor may enjoy tax-free status as a housing allowance. 403(b) Retirement Distribution as Housing Allowance A s seen in the above link,  t he church can designate all or a part of the dist...

Question: A church has been asked to act as a conduit for a wealthy individual to give a considerable gift to a needy family in its community. The church has not yet identified this family as a target of its own benevolent fund nor does it intent to do so. Can the church accept the donation from the wealthy individual, granting a charitable contribution, and serve as a conduit to pass along nontaxable income to the needy family? Answer: We advise against participating in this situation. A September 9, 2009, blog post gives some helpful insight into this kind of situation. Benevolent Fund Review If the church decides to take on the family and support it through its benevolence fund, then that is different. This should still pass a reasonableness test in which the amount from the church is not a "token" gift to establish some legitimacy to the wealthy individual's tax-deductible gift. Rather, the church must demonstrate that it has truly seen and respond...

Question: A church would like to rent out its parsonage in order to raise money to repair its church building. What will be the consequences of doing this ?   Answer: A November 14, 2012 blog post applies directly to this situation. Church Renting Building: Unrelated Business Income Tax As in the November post, the church will have income or local property tax consequences to consider.

Question 1: A church asks it members to consider making a contribution to its missionaries for a Christmas Gift. Contributions are designated to the church in general, i.e. "The Missionary Christmas Fund" (not to any individual missionary); the church leadership has full control over what amount it gives to each missionary. After all contributions are received, the church usually gives about $200 to each missionary, with checks issued to them personally. The individual contributors receive a tax deductible receipt. Is this correct? Does the church need to issue a Form 1099-MISC to each missionary, since the amounts are not over $600 ? Answer 1: Since the congregants donated directly to the church and not the individual missionary, their donated a mo u nts are tax deductible. The amounts they donate should be reported to them at the end of the year in a statement listing their donations. The $600 referred to in the question i s an annual amount. If the church di...