Skip to main content

Three Things to be Aware of When Establishing Online Giving Procedures

Question:
What items does our 501(c)(3) organization need to be aware of when establishing online giving procedures?

Answer: 
When a 501(c)(3) organization establishes online giving procedures, they should keep the following three points in mind:

1) Charitable contributions through an online merchant system should be recorded as the gross amount, not the net amount, when providing charitable giving receipts. 

For example, Joe Smith decides to donate $100 to ABC Organization, a non-profit organization, through the use of PayPal. PayPal will charge ABC Organization a processing fee of 2.9% ($2.90) for receiving the funds. Although ABC's net amount received is $97.10, Joe Smith should receive record of a deductible donation of $100. 

2) Contribution receipts should clearly meet IRS requirements. 

The following links will lead you to blog posts that relate to IRS requirements for contribution receipts:

Church Official Statements of Annual Giving

MinistryCPA Special Topic: What Does "Quid Pro Quo" Mean?

Also, read IRS Publication 1771 for more requirements of contribution receipts.

3) The 501(c)(3) organization must maintain discretion and control over all contributions. 

It is important that the non-profit organization maintain full control of the donated funds and practice discretion as to their use to ensure that the funds will be used to carry out the organization's functions and purposes. 

Accordingly, the organization may endeavor to honor donors' wishes that designate use of donated funds. However, the organization must maintain control over the ultimate determination of how all donated funds are allocated. Contributions become the property of the charity, and the charity has the discretion to determine how best to use all contributions to carry out its functions and purposes. 

According to IRS Publication 526, "Charitable contributions must be made to or for the use of a qualified organization in order to be deductible." If a contribution is made directly to an individual, it is not deductible. For example, if payments are made directly to individual missionaries, ministers, etc., the contribution is not deductible. 

The organization should also avoid becoming a conduit of funds. Read our blog posts on the matter:

Church as a Conduit for Non-Deductible Gifts

Church as a Conduit for Non-Deductible Gifts: Illustration

Unsolicited, Unilateral Gifts Directed to Individuals





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