MinistryCPA - Corey A. Pfaffe, CPA, LLC

Question:  A church had a guest speaker fill the pulpit twice during the span of the year. For those two times, the speaker received a total of $1,000 in honorarium ($500 per Sunday). The church issued him a Form 1099-NEC for that amount.  However, during the course of the year the speaker and his wife encountered substantial hardship. Is it permissible that the church choose to offer assistance to the speaker from its benevolent fund? Will a gift of this nature be taxable income to him? Answer: To determine whether the gift is considered taxable income in this case, let's consider the following. 1) The nature of the gift.               The nature of the gift should be entirely benevolent. If the gift is given to supplement the less than fair value amount paid to the speaker for his services, or with the expectation he will speak again in the future, the gift is considered income and is taxable to the individual.  Benevolent disburs...

Question:  How should a church record online donations in the following situations? Additionally, what amount is the donor allowed to deduct as a charitable contribution? 1.) The processing fee is deducted from the donor's gift.  2.) The donor pays the additional processing fee.   Answer: 1.) The processing fee is deducted from the donor's gift.               For example, an individual gives $100 to the church and the payment processing company charges a $3 processing fee. The church will receive the net amount of $97. We recommend that the church record the full amount of the gift, $100. The church will then record an expense to account for the $3 processing fee. The donor receipt will reflect the gross amount ($100), which is the amount deductible to the donor as a charitable contribution. 2.) The donor pays the additional processing fee.               In this case, the donor ...

Question:  Why is it best to credit donor designated contributions to Designated Fund Equity accounts rather than Income accounts, as you propose in your recent post? (" Debits and Credits for Designated Gifts ") Answer:  In most cases, the Income accounts in QuickBooks relate to the receipt of General Fund contributions. At the end of each fiscal year, those Income accounts close into the balance sheet General Fund account. The same process is followed regarding General Fund expenses. The effect of posting designated gifts and disbursements to Income and Expense accounts which are closed into the General fund balance combines them with all other financial transactions thus zeroing out any remaining unexpended designated gift amounts. Some ministries have avoided this by keeping a second set of records, which is unnecessary in our opinion. A charitable organization will naturally want to maintain its Designated Fund balances which will carry over from one year to the next w...

Question:  A not-for-profit organization wants to establish two ministries with similar but independent operations, for example, a men’s ministry and a women’s ministry. It wishes to prepare and implement a budget for each ministry and wants the ability to create reports for each ministry. Ultimately, it wants any excess or deficiency of receipts compared to disbursements for a given year to be “remembered” as the ministry continues year upon year. Additionally, donors are occasionally solicited to contribute to short-term special projects with the promise that their donations will be spent only for that temporary project. For example, perhaps the women's ministry wishes to received designated contributions toward a one-time equipment purchase. How might an organization accomplish these multiple objectives: 1) tracking men's and women's ministry general fund balances year-on-year, and 2) tracking special projects' receipts and disbursements?  Answer: Before addressing ...