1 World Wide Missions. 36,756,666 (estimated) Population

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World Wide Missions

36,756,666 (estimated) Population

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Guiding Churches Through the Money Maze

Rod WiltroutChurch Finance Specialist

Missions Advancement Group

California Southern Baptist Convention

Fresno, CA

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Table of Contents

• Church Treasurer

• Church Record-Keeping

• Better Budgeting

• Charitable Contributions

• IRS Issues

• Financial Procedure and Review

• Income

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Table of Contents

• Professional Expenses

• Housing – Parsonage Allowances

• Church Reporting Requirements

• Who is a Minister?

• Other

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Church as a Business

Things every church needs to know

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Here is What the IRS Says

• You are a 501 (c) 3 business• http://www.t-tlaw.com/lr-04.htm• Focus of organization's purpose must be to

benefit the community or society as a whole, not just the organization's members and their families or other select individuals.

• A §501(c)(3) organization may not devote a substantial part of its activities for lobbying (try to influence) purposes. (section 2A.1)

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Here is What the IRS Says

• If substantial lobbying activities exist, tax exempt status is forfeited. Lobbying activities may be found to be substantial in the ten to twenty percent (10-20%) range of total nonprofit activities. (section 2A.2)

• Any organization exempt from tax under §501(a) must nonetheless pay income tax on its unrelated business income. This refers to income derived from any unrelated trade or business regularly carried on. (section 3A) (990T income)

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The Treasurer

Qualifications

and Duties

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First, the Basics

• Funds must be properly managed• IRS does not tell the church how much to

pay staff, but it does require that it be done in a certain and timely manner

• Church members want to know that the money they give is being handled properly

• They demand a greater accountability and have higher expectations of business operations

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The Treasurer:

• One of the most time consuming jobs in the church

• Needs to produce timely and reliable information

• Bills must be paid on time• Tax requirements must be met• May be responsible for financial

decisions

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Qualifications• Willingness to work cordially with people

and the ability to be fair minded • Have knowledge of the working

organization of the church • Should reflect the highest Christian ideals • Should have knowledge of accounting

procedures or the willingness to learn accounting procedures

• Person selected to be church treasurer, tithes

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Qualifications

• Possess a sense of calling from God

• Be open and willing to receive training

• Be capable of managing details of financial matters

• Be persons of integrity (trustworthy)

• Be good stewards (managers)

• Be capable of maintaining confidentiality

• Have a good reputation

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Duties

• Keep accurate records in appropriate financial journals of all monies received and disbursed.

• Reconcile monthly bank statements and correct ledgers as needed.

• Sign checks in accordance with church policies and procedures and verify the supporting data for each check request. (Policies & Procedures should be written)

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Duties• Make monthly and annual reports to the

church. If the church has a committee to oversee the financial matters of the church the treasurer should also make regular reports to the committee.

• Keep church staff and appropriate committees informed of any trends or changes in fiscal matters.

• Instill and preserve a high financial confidence throughout the congregation.

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Duties

• Submit accurate financial records for annual audit according to church policy

• REMEMBER : the money belongs to the CHURCH not the treasurer.

Trustee Duties

The Basics

• Accountable to the Pastor or Executive Pastor

• Ministry Target: the Church• Minimum Maturity Level: Stable,

Mature Christian• Spiritual Gifts: Administration,

Giving, Service• Talents/Abilities: Business and/or

Finance

The Basics

• Personality Traits: Trustworthy, Honest, Sincere, Discreet, Levelheaded, Mature, Analyst, Dependable

• Passion for: Good Stewardship• Length of Service in Office: 3-5

Years• Time Commitment: 1-2 Hours per

Week or Month as Needed• Commitment: Participate in

Meetings or Training – 1-2 Hours per Month

Responsibilities/Duties

• Establish and Review Procedures for Church’s Financial Management

• Serve as Legal Guardians for All Church Property

• Represent the Church in Legal Matters

• Give Input/Financial Advice to Stewardship Committee and Pastoral Staff as Needed


• Execute Bank Notes, Deeds, and other Legal Documents After Receiving Approval from the Church Decision-making Body

• Examine Quarterly Financial Reports to Monitor Financial Expenditures of the Church

• Fulfill the Laws of this State while Serving as a Trustee of the Church


• Assist in the Process of Awarding Contracts for Work that Must be done to Improve or Repair Church Buildings and Property

2001 Gospel Light. Permission to Photocopy granted. The Big Book of Job Descriptions for Ministry

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Church Record - Keeping

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Just Part of the Job…Someone must be responsible for the

stewardship of the church's funds. • Keeping accurate financial records • Preparing accurate and meaningful

financial statements • Budgeting and anticipating financial

problems • Safeguarding and managing the

organization's financial assets • Complying with federal and state reporting

requirements

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Preparation of Financial Reports

• Comprehensible so that anyone taking the time to study them will understand the financial situation.

• Concise so that the person reading them will not get lost in detail.

• Inclusive so that all activities of the church are reported.

• Comparative with year to date spent or budget amounts.

• Timely, as soon after the end of the month as possible.

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Accounting Methods

• Single Entry

• Double Entry

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• At least two counters in a secure room

• Necessary tools-calculators w/ paper, red pencils, coin rollers, locking money bag

• Keep envelopes, or computerized record, for three years

• Loose offerings counted and verified

• Envelopes opened, amounts enclosed verified and marked on each envelope

Counting the Money

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• Total amounts taken out of envelopes should agree with total of all envelopes

• Notations of designated offerings noted on count sheet

• Deposit of all monies is prepared • Total deposit must be equal to coins, bills

and checks, notes on count sheet • Totals of envelopes, special gifts, and the

loose offerings must also equal total deposit

• All money received should be deposited and have counters sign count sheet

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Cash ManagementInternal Control• Detect error or fraud • Check accuracy and

dependability of financial records

• Encourages adherence to regulations and policies – should be in writing

• Keeps honest members honest by removing the temptation of dishonesty

Basic Control• Do not assign the same

person responsibility for more than one of the following tasks:

• Counting the offering • Writing checks • Reconciling the bank

statements • Recording individual

contributions • No payments for

services from offerings

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What are Contributions?

• A charitable contribution is the voluntary transfer of cash or property motivated by something other than "consideration".

• Consideration is something being received in return for a payment.

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Gift Options: see page 15-16

• Cash• Securities• Real Estate• Life Insurance• Bargain Sale• Personal Property• Charitable Gifts of

Partial Interest

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Gift Options

• Charity Auction-gift is only amount spent above fair market value

• Gifts made by an individual directly to a missionary are not deductible as charitable contributions. To be tax deductible To be tax deductible contribution must be to or for the use of an IRS approved tax-exempt organizationIRS approved tax-exempt organization. If the gift meets the true definition of a gift, the missionary would not have to claim it as income. See page 21.

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What is Not a Tax Deductible Gift page 16

• Service• Use of Property• Gifts made to Individuals – may not

designate the recipient of the gift• Private School tuition• There can be no strings attached and the

gift must be used for tax purposes in the year it was given

• The gift is given at the point of “irrevocable giving over” (Wave OfferingWave Offering)

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Conditions for Gift Giving• Gifts in excess of $5,000 must be

appraised by an accredited appraiser and IRS form 8283 must be used to document the gift. Donation is the sale price.

• Receipt should not list value of the gift• Receipt should list items on page 22• Donee (church) must keep sufficient

records to validate gift• Receipt must be given no later than

January 31 of the year following donation

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• IR-2005-149, Dec. 22, 2005• WASHINGTON — Internal Revenue Service officials today reminded taxpayers

that they must obtain a charity’s written acknowledgment of their vehicle donation before they claim a deduction for the donation. For deductions of more than $500, the taxpayer is required to attach the acknowledgment to the taxpayer’s return for the year of the donation.

• Effective for vehicles donated to charity on or after January 1, 2005, the American Jobs Creation Act of 2004 provides that, generally, a taxpayer’s deduction is limited to the gross proceeds from the sale of the vehicle by the charity. The charity must provide a written acknowledgment within 30 days after the vehicle is sold that notifies the taxpayer of the amount of the gross sales proceeds.

• The IRS is aware that questions have arisen as to whether the charity must sell the vehicle in 2005 in order for the donor who donated a vehicle in 2005 to receive a deduction for 2005. The charity does not need to sell the vehicle in 2005. A taxpayer can take a charitable contribution deduction only for the year the vehicle is transferred to the charity, even if the vehicle is not sold by the charity until a later year. (Only taxpayers who itemize their deductions can take a charitable contribution deduction.)

• However, a taxpayer cannot take a charitable contribution deduction of $500 or more for a vehicle donation unless the taxpayer has received a written acknowledgment of the donation from the charity and attached the acknowledgment to the return.

• If the taxpayer receives the written acknowledgment after filing the tax return for the year of the donation, the taxpayer may, after receiving the acknowledgment, file an amended return for that year and claim the deduction on the amended return. The taxpayer must attach the acknowledgment to the amended return.

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Restricted Funds

• These funds are used to account for resources received from donors or outside agencies, but are restricted to a specific purpose. (building fund, youth fund)

• The restrictions or guidelines for the fund should be in writing.

• Takes a church vote or letter from donor to un-designate or re-designate funds

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Restricted Funds

• HOWEVER, donors cannot force church to adhere to their designation

• Violates irrevocable giving over of funds

• However, DA can and often does

• “Enforcing Donor Restrictions on Gifts to Charity” by Richard Hammer gives full treatment of this issue.

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Discretionary Funds• Used at the discretion of the party (s)

who oversee it• List of (written) restrictions on use of

funds is required to keep funds from becoming income to recipient – monthly

• Adequate accounting of funds is required

• Ask for IRS Publication 1828. Or, you can download a copy on the IRS website, www.irs.gov/eo. Page 54

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Discretionary Funds

• (2) private benefit

• In addition to the prohibition on inurementinurement to “insiders,” a section 501(c)(3) organization’s activities may not serve private interests. The tax guide explains this limitation as follows:

• An [exempt] organization's activities must be directed exclusively toward charitable, educational, religious, or other exempt purposes. Such an organization's activities may not serve the private interests of any individual or organization. Rather, beneficiaries of an organization's activities must be recognized objects of charity (such as the poor or the distressed) or the community at large (for example, through the conduct of religious services or the promotion of religion). Private benefit is different from inurement to insiders. Private benefit may occur even if the persons benefited are not insiders. Also, private benefit must be substantial in order to jeopardize exempt status.

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• All salaries and compensation amounts need to be "reasonable." The church should determine whether its salaries are in line with other churches and purchase salary surveys. Excessive benefits can include expensive cars, cellular phones, and the use of a limousine or airplane. The church should secure board approval for all compensation and benefits.

Outrageous salaries and benefits

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IRS Issues

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Be Compliant with CA and IRS

•Articles of Incorporation•Bylaws•Exemption from Franchise Tax•Statement of Information•Yearend IRS Regulations that Effect the Church http://www.csbc.com/financialmatters/article184086c2118867.htm

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Forms You Need to File..\..\ABC's of Church Budgeting\CLT Conference\

2010\Church Reporting Requirements.pptx

Church Reporting Requirements

Willful or Intentional Willful or Intentional Disregard Disregard Sec. 6672 - 100% penaltySec. 6672 - 100% penalty

“Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax,

or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof,shall in addition to other penalties provided by law, be

liable to a penalty equal to the total amount of the tax evaded, or not collected, or not collected for and paid over”

Baptist Temple Tax Dispute - Updated:07-24-2001

Church Building Confiscated To Pay Tax Debt

For 16 years the leaders of the Indianapolis Baptist Temple refused to withhold federal taxes from their

employees' paychecks or to pay federal taxes as an

employer. The protest came to an end Feb. 13, 2001, when federal marshals seized the church building to pay taxes and fines totaling $6 million.The church was ordered to be sold at auction by U.S. District Judge Sarah Evans Barker in a Sept. 28, 2000, ruling, in which she gave the conservative evangelical congregation until Nov. 14 to vacate.

Code Section: 7201

Action: Willful attempt to evade or defeat tax.

Penalty: A felony, with a criminal penalty of up to $100,000 (up to $500,000 for a

corporation), and imprisonment of up to 5 years (or both).

Code Section: 7204

Action: Willful failure to provide a W-2 to employees, or willfully including false information

in a W-2.

Penalty: A misdemeanor, with a criminal penalty of up to $1,000, and imprisonment or up to 1 year

(or both).

Form W-2Wage and Tax StatementW-2C if you make a mistake on the W-2

Form W-3Transmittal of WageAnd Tax Statement W-3C if you make a mistake on the W-3

Form W-2GCertain Gaming Winnings(Example Raffles)For more information on reporting requirements for gaming activities, see IRS Publication 3079, Gaming Publication for Tax-Exempt Organizations

State of CA - http://ag.ca.gov/charities/raffles.php

Form W-9

Request for Taxpayer Identification Number

Before you pay someone you need their Federal ID # or their Social Security Number

Sales & Use Tax – Calif.

David Rutledge will teach on this during the 2nd hour elective. Don’t Miss it!

Know the difference between

Tax Evasion & Tax Avoidance

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Form 941Employer’s Quarterly Federal Tax Return Three

types of taxes: Income taxes, Employee’s FICA, Employer’s FICA (non-ministerial)

• Taxes paid monthly if taxes are $50,000 or less in the lookback period

• Taxes paid bi-weekly if taxes are more than $50,000• File 941 Quarterly even if you have onlyonly ministerial staff• See IRS Publication 15 (www.irs.gov) - download a new new

oneone (use a payroll service and you will not have to deal with this)

• Form 941X - To correct mistakes

Penalties For Paying Late• 2% - Deposits made 1 - 5 days late • 5% - Deposits made 6 - 15 days late • 10% - Deposits made 16 or more days late • 10% - Deposits made at an unauthorized financial

institution, paid directly to the IRS, or paid with your return.

• 15% - Amounts still unpaid more than 10 days after the date of the first notice the IRS sent asking for the tax due or the day on which you received notice and demand for immediate payment, whichever is earlier.

• (See IRS Publication 15) • (Use a payroll service and you will not have to deal with this(Use a payroll service and you will not have to deal with this))

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Form 944Employer’s Annual Federal Tax

Return

Small employers that have been notified by the IRS to file Form 944 ($1,000 or less - see

form instructions) may use that form; other employers required to file must use Form 941.

Form 945

Annual Return of Withheld Federal Income TaxThis form is used to report withheld federal income tax from nonpayroll paymentsGambling winnings, backup withholding (28%) when you do not have the Federal ID number or Social Security number

Form 945X - To correct mistakes

Form 990-TForm 990-TThe The OnlyOnly One the Church fills out! One the Church fills out!

Exempt Organization Business Income Tax Return

For more information on unrelated business income, see Unrelated Business

Income Tax (UBIT) IRS Pub 1828

Form is due when income is $1,000 or more

I-9 Must be filled out by all employees and filed separately from employee file All employees (new employees and those

hired since Nov. 6, 1986) must fill out must fill out section of Form I-9 and churches must fill out section two

Do not file Form I-9 with U.S. Immigrations and Customs Do not file Form I-9 with U.S. Immigrations and Customs Enforcement (ICE) or USCIS.Enforcement (ICE) or USCIS. Form I-9 must be kept by the employer either for three years after the date of hire or for one year after employment is terminated, whichever whichever is lateris later. The form must be available for inspection by authorized U.S. Government officials (e.g., Department of Homeland Security, Department of Labor, Office of Special Counsel).

1099 Misc Issued to self-employed for income tax or non

employees. Issued if paid more than $600 annually Not needed for a corporation or for anyone who will

receive a W-2 from another employer for work done Name, address and SS needed beforebefore 1099 can be

issued. Get the info before payment is made and have them fill out a W-9

1099 is corrected by reissue with the box at the top mark checked

1096 is the Transmittal form for 1099 misc

Form DE-542 (CA) Independent Contractors

• WHO MUSTMUST REPORT:

• Any business or government entity (defined as a “Service-Recipient”) that is required to file a Federal Form 1099-MISC for service performed by an independent contractor (defined as a “Service-Provider”) must report. You must report to the Employment Development Department within twenty (20) days of EITHEREITHER making payments of $600 or more OROR entering into a contract for $600 or more with an independent contractor in any calendar year, whichever is earlier. This information is used to assist state and county agencies in locating parents who are delinquent in their child support obligations.

DE-1NP (CA)– Employment Form for Non-Profits

An employer is required by law to file a registration form with the Employment Development Department (EDD) withinwithin fifteen (15) calendar days after paying over $100 in wages for employment in a calendar quarter, or whenever a change in ownership occurs

DE-34 (CA) REPORT OF NEW EMPLOYEE(S)

• WHO MUST BE REPORTED:• State law requires all employers all employers to report all newly hired

or rehired workers to EDD within 20 days of their start-within 20 days of their start-of-work dateof-work date. State and county agencies use this information to assist them in locating parents who are delinquent in their child support obligations.

• An individual is considered a new hire on the first day in which he/she performs services for wages. An individual is considered a rehire if the employer/employee relationship has ended and the returning individual is required to submit a W-4 form to the employer.

DE-6 (CA) - Quarterly Wage & Withholding Report

• Can be done online

• www edd.ca.gov

• State version of IRS 941

DE-7 (CA) - Annual Reconciliation Report

CA Franchise Tax Every church or ministry that incorporates in

the state of California has to pay a minimum tax of $800.00 per year unlessunless the church or ministry files for an exemption. The exemption is not automatic!

Churches get these notices because they never filed for the exemption. In order to apply for the exemption, you need to file Form FTB-Form FTB-3500 or FTB-3500A3500 or FTB-3500A. If you have recently incorporated (within the last 4 years), and have not filed for the exemption, consider doing it immediately.

Out of State Guest Speakers Withholding

Did you know that the state of California requires all churches and ministries to withhold 7% of all honorariums over $600 7% of all honorariums over $600 paid to guest speakers that live paid to guest speakers that live outsideoutside the the statestate? (Prior to 2010 - $1,500)

Report to the state on form 592-B the amount of earnings and the amount of withholdings.

The penalty for not withholding is at least 10% of the entire honorarium10% of the entire honorarium. This is a penalty against the church

Calif. Statement of Information

• Updates your church office address• Updates your Principal Officers; Pastor (CEO),

Secretary, Chief Financial Officer (Treasurer in small church)

• Must be done biennially• No cost• Penalty for not doing so: possible Corporate

Status Suspension• To see your status http://kepler.sos.ca.gov

Form 5578 Annual Certification of Racial Nondiscrimination

• If a church has a school, the Annual Certification of Racial Nondiscrimination must be filled out (form 5578)

• Form is due 1515thth day of 5 day of 5thth month after close of month after close of fiscal yearfiscal year

• This includes preschools through universitiespreschools through universities• Church must have written nondiscrimination

policy-known to community in newspaper

Contributions• All cash donations less than $250 must be

substantiated by either bank record (canceled check) or written communication from the charity

• All donations over $250 must be substantiated by written communication from the charity with name of donor and “the declarationthe declaration” on statement

• Non Cash Property over $250 in value must have description

No goods or services were received for contributions except No goods or services were received for contributions except that which was spiritual in nature.that which was spiritual in nature.

Contributions

• Non Cash gifts in excess of $5,000 must be appraised by an accredited appraiser and IRS form 8283 must be used to document the gift. Donation is the sale price.

• Receipt should not list value of the gift• Donee (church) must keep sufficient records to

validate gift-form 8282• Receipt must be given no later than date of

donation or tax return due date

Other Forms to Fill Out

Salary Reduction Form for 401k & 403b

Housing Allowance form (ministers)

New W-4

Where to Find Forms

• IRS – Mail or Local IRS office• IRS website – www.irs.gov • CA Franchise Tax Board – www.ftb.ca.gov • CA Board of Equalization – www.boe.ca.gov

For furthering Requirements.pptxDavid Rutledge EA, CEP, RFC David Rutledge EA, CEP, RFC Stewardship Consultant

California So. Baptist Convention

Rod Wiltrout - Church Finance SpecialistCalifornia So. Baptist ConventionCalifornia So. Baptist Conventioninfo@ yourchurchmatters. comwww. yourchurchmatters. Com

www . Csbc. Com/financialmatters..\..\ABC's of Church Budgeting\Volunteer Ministry\Capturing Community Volunteer Hours and Costs Holly edited.pptx

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Review Committee

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Financial Procedure and Review(Not an Audit)(Not an Audit)

The purpose of a review of the church’s financial records is to:

• Support the treasurer in his/her duties. • Verify that the financial records area being

maintained in an accepted accounting practice manner.

• Verify that disbursements and receipts are posted correctly and reconciled with the bank.

• Verify that the financial reports that have been given to the church agree with the official General Ledger and Balance Sheet of the church.

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Review is to be performed when

• The fiscal year ends.

• A new treasurer is elected.

• Misuse of funds is suspected.

• Any other time an appropriate governing board so requests.

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Responsibilities of Review Committee

• Spot-check the offering envelopes to verify the individual record of contributions

• Verify bank deposit slips with entry in financial records

• Spot-check disbursements for proper entry and distribution of charges to various budget accounts

• Check the accuracy of the total in all accounts

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Responsibilities of Review Committee page 24

• Determine if approved procedures have been followed in the handling of church funds

• Study the insurance program of the church to determine if sufficient amount is carried. Review Committee does not perform this task if the church has assigned someone else this responsibility, such as Properties Committee.

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Responsibilities of Review Committee• Study the retirement

and employee insurance programs to determine if adequate protection is provided. Do not perform this task if another committee has this task.

J. David Carter, Managing Your Church Finances…Made Easy, (LifeWay Press, 1998) p. 54.

• Review Committee should submit list of people to be bonded including:

• Treasurer• Counting Committee• Any secretaries handling

monies• Others who handle funds• Blanket policies may be

provided through church insurance company

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Responsibilities of Review Committee

• For additional resources Call (800) 838-2272 for a copy of “A Financial Examination Guide” by Marvin Peters, D. Min.

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Investment Strategies, Policies, and Procedures

Questions You Should Ask

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Questions You Should Ask:

• Which types of investments are acceptable risk to your church?

• Who will administrate the funds? A person or committee?

• What percentage of funds will be invested?• Can the broker be a church member?• Ethical standard – types of prohibited

companies – pornography, tobacco, alcohol, abortion, gambling, etc.?

• Written policies and procedures.

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Dynamic Church Budgeting

Holistic Budgeting

for the 21st Century

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Better Budgeting

• A budget is nothing more than your church's plans expressed in numbers, an expression of what the church would like most to do

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OBJECTIVES OF A BUDGET: • To be good stewards of the money with which

the church has been entrusted. • To develop a total church plan to guide

planning and expenditure decisions during the year.

• The sharing of goals and budget needs among leaders of the church.

• The harmonizing of leaders goals with individual committee goals and church needs and concerns.

• To facilitate financial reporting to the church.

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Types of budgets:

• Same as Last Year

• Zero Based Budget

• Capital Budget

• Construction

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Budget Preparation and Use• Ask the right questions page

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• Analyze future needs• Update ongoing costs• Determine amount of debt

reduction• Account for cash flow

fluctuations• Compare to previous year’s

budgets• Educate staff on the budget

• Who monitors the budget

• How often is it monitored

• How are over and under-budgeted issues handled

• Is the budget used as a mirror to reflect the church’s direction and emphasis

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The Finance /Stewardship Team

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Require all people on Finance /Stewardship team to:

• Possess a sense of calling from God• Be open and willing to receive training• Be persons of integrity• Be tithers and good stewards• Be capable of maintaining confidentiality• Mature believers-understand biblical

principles of finances• Ministry oriented• J. David Carter, Managing Your Church Finances…Made Easy. LifeWay Press, Nashville, TN. 1998Page 12

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The Finance/Stewardship Team consists of:

• Stewardship Education: communicates the various aspects of biblical stewardship through the church programs, activities and materials

• Mission Support: helps members understand how the church fulfills the Great Commission in the church, the association, the state convention, and around the world

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The Finance/Stewardship Team consists of:

• Budgeting: Guides the church to have the best budget that focuses on Purpose, vision, and ministries, rather than on how much it costs. Promotes involvement in and commitment to ministry

• Accounting: Encourages confidence in the church by being responsible in receiving, counting, depositing, disbursing, recording, reporting and auditing church funds

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Accounting Questions You Better Ask• —Do we count and record offerings immediately after they are received? Every moment they sit around uncounted is a moment when they can be dipped in to.

• —Are offerings always stored in a secure or well-supervised area?

• —Do we count our cash and checks twice for accuracy? To err in addition is human. But the more we check our work, the more we develop careful accounting habits and avoid careless accounting mistakes.

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Accounting Questions You Better Ask

• —Do we place offerings in lockbags (money bags provided by the bank requiring a key to open) after counting?

• —Do we place the lockbags in a safe or a night depository until the bank opens?

• —Do we strictly limit who has access to the safe?

• —Do we change the safe combination when someone is no longer authorized to use it?

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• —Do we make sure that the same person is not involved in more than one of the financial procedures of the church (collecting funds, counting them, recording the giving, authorizing expenditures, writing the checks, auditing the account)? The more access a person has to the various procedures, the greater the ability to misuse funds.

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• —Are all persons authorized to write checks against church funds held responsible through an accounting/auditing system?

• —Do we provide the bank with annual updates of persons authorized to sign checks against any account associated with the church? Some banks are, surprisingly, not strict about who signs checks for a church or for a particular program of the church. They know we’re a volunteer organization with a high turnover in leadership.

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• —Do we issue annual receipts for giving? This is just another check on determining that what comes in has, in fact, been accounted for.

• Bergstrom, R. L., Fenton, G., & Pohl, W. A. (1992). Mastering church finances. Series statement from jacket. [Mastering ministry] (page 120). Portland, Or.: Multnomah Press; Christianity Today.

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The Budgeting Process

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What is a Financial Ministry Plan?

A plan for ministry built on a church’s values, mission and vision that helps a congregation remain focused upon ministries rather than money spent.

This will help to guide the over-all mission and direction of the church!

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Develop Your Church’s Values

• Which convictions would your church die for?

• Which values drives your church’s focus and budget?

• Which opinions influence the way your church “does church?”

• Your church could have 8-10 values

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Develop Your Church Vision Statement

• Whom will your church reach?• How many will you reach?• How will your church develop those you reach?• What kind of ministries will your church have?• How will your church reproduce and how often?• How will your church empower your people for

kingdom growth?• What will your church become?

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Bringing Other Programs and Ministries into the Mix

• Communicate the purpose and vision of the church to the Ministry Leaders

• Review the goals for coming budget year

• Let the ministry goals determine the needs

• Help them tie dollars to their goals

• Use the Ministry Proposal plan

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Possible New Ministries or Building Programs

• Where has God revealed that He is at work

• What building/parking/land limits will you experience this year

• Do you have a long-range plan to alleviate this constriction

• Will you build debt free or use a lending agency

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Current Ongoing Debts and Expenses

• What expenses do you currently have– Upkeep of existing facilities/parking/

landscape

• What percentage of the budget to they comprise

• What upcoming expenses will need to be addressed in the coming year

• What is the plan for reducing or eliminating the debts

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Staff Financial Support/New Staff

• How do you determine compensation for your staff

• What type of evaluation tool do you use in determining staff compensation

• How do you assess staff needs i.e. insurance, retirement, salary, etc.

• How do you determine when new staff are needed

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Personal IncomePersonal Income

• Salary

• Housing Allowance

• Salary

• Housing Allowance

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Determine How Much SalaryDetermine How Much Salary

• Church’s financial situation

• Location and cost of living

• Education and experience

• Inflation

• Performance

• Church’s financial situation

• Location and cost of living

• Education and experience

• Inflation

• Performance

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• For ministersFor ministers

• Designated in advance by the churchDesignated in advance by the church

•Must be done before January 1st of Must be done before January 1st of each year and then prospectively each year and then prospectively throughout the year as necessarythroughout the year as necessary..

• Legal limitsLegal limits

Housing AllowanceHousing Allowance

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If You Own or RentIf You Own or Rent

The maximum amount eligible for exclusion is the least of:

• The designated amount

• The actual eligible expenses

• The fair rental value of the home including furnishings plus utilities

The maximum amount eligible for exclusion is the least of:



• The fair rental value of the home including furnishings plus utilities

112

If You Live in a ParsonageIf You Live in a Parsonage

The maximum amount you can exclude is the lesser of:



The maximum amount you can exclude is the lesser of:



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Housing Allowance Can IncludeHousing Allowance Can Include

• Mortgage or rent• Utilities• Taxes• Insurance• Furnishings• Repairs and improvements

• Mortgage or rent• Utilities• Taxes• Insurance• Furnishings• Repairs and improvements

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RecommendationsRecommendations

• Designate housing allowances for ordained ministers

• Consider cost-of-living increases• Consider appropriate merit

increases ..\..\ABC's of Church Budgeting\Dynamic Church Budgeting Link.ppt

• Designate housing allowances for ordained ministers

• Consider cost-of-living increases• Consider appropriate merit

increases ..\..\ABC's of Church Budgeting\Dynamic Church Budgeting Link.ppt

Budget Promotion and Stewardship Training

..\..\ABC's of Church Budgeting\Creating and Keeping A Dynamic Stewardship Focus in Your Church 2010.pptx

115

116

Income & Professional Expenses

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What is Income to the Pastor?

• It doesn't matter what you call it. According to Sec. 61, gross income includes all income, cash, value of property, value of services, from whatever source, unless it is specifically excluded by a section in the Internal Revenue Code.

• Employers are permitted to exclude from gross income (as a de minimis fringe benefit) the value of a gift that is given by an employer if the value is insignificant

• THERE’S NO SUCH THING AS A LOVE AS FAR AS THE IRS IS CONCERNED. IT’S INCOME!

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What is Income to the Pastor?

• Church members are free to make personal gifts to ministers, such as a card at Christmas with money in it. Such gifts may be tax-free gifts to the minister though they are NOT tax deductible by the donor. They are given out of affection, respect and admiration, not as a way to compensate the minister for his services.

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Professional Expenses

• Must be Accountable Reimbursement – no lump sum, spend how you please.

• Must be turned in every 60 days – on day 61 it’s income even if you filled out an expense report

• Travel or program advance must be turned in every 120 days – on day 121 it’s income even if you filled out an expense report

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Some Things You Can Deduct

• Travel• Meals – business

related• Moving Expenses –

with some exceptions

• Term Life Insurance – up to $50,000

• Health Insurances with some exceptions

• Education – within limits

• Entertainment – business related

• Professional fees• Subscriptions• Convention

Expenses• Books and Supplies• See pages 36,39-40

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Some Things You CAN’T Deduct

• Personal use of church provided car

• Property purchased from church at discount

• Forgiveness of debt• Below market loans• Trips to the Holy Land• Commuting expenses• Minister’s clothing –

exception of Robes/collars

• “Guesstimates” on business mileage

• Social Security offset paid by Church

• Bonuses or gifts from the church

• Term Life Insurance premiums above $50,000

• Retirement or farewell gifts

122

Failure to Claim Reimbursement Costly

• Employees who fail to claim reimbursement for normal, reimbursable business expenses may not deduct the expenses on Schedule A even if they exceed 2% of AGI.

123

Outside Contracting vs. Internal Control

124

Issues at Hand

• Workman’s comp

• Income and Social Security Tax

• Planning Financial Support p. 22

• Benefits

• Oversight

• Qualifications-yours and theirs

125

Minister’s Housing

126

Minister’s Housing Allowance

• Covered on pages 55-63

• “Planning Financial Support,” a booklet written by GuideStone, gives a full discussion on this topic and are free for the asking (888) 984-8433

• We will come back and discuss this if time permits

127

Church Reporting Requirements

128

Follow the Rules or pay the price

• Covered on pages 65-81

• You will receive reminders of when you need to send in these forms when you subscribe to Treasurer’s Alert (800) 222-1840 or www.churchlawtoday.com

129

Who is a Minister?

130

Must Do Four of the Five Functions• 1987, Tax Court, WINGO v. Commissioner, 89 T.C. 922 (1987): The tax

court ruled that a minister is someone who –

• Administers sacraments (usually includes baptisms, communion, marriages, funerals, prayers for the sick).

• 2. Conducts worship services.• 3. Performs services in the "control, conduct or

maintenance of a religious organization."• 4. Is "ordained, commissioned or licensed.“ –

Mandatory• 5. Is considered to be a spiritual leader by his

religious body.

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Tax Issues

• Employed for Income Tax

• No withholding by church

• Receives a W-2 from the church by January 31st of each year

• Self-employed for Social Security

• Must pay 15.3 percent taxes

• Receive housing allowance until they die, not until they retire from their retirement board

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Computer Software

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Computer Software

• What do we want this software to do?

• Do we want it to do just accounting or just church management, or a combination of the two?

• Can the software be networked with other computers? How many? (Not all do)

• How user friendly is the software?

134

Computer Software

• What is the cost? Some programs come in modules that can be added later as the need arises.

• Is there any telephone or online technical support? Is there any extra cost beyond the software cost for technical help?

• Can I get a trial version of the software to look at?

• Types of Software.

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Websites & Resources to Assist You

• www.irs.gov• www.ssa.gov• www.GuideStone.org• www.immediateannuities.com• www.newminister.com• www.yourchurchmatters.com• www.churchlawtoday.com• Merrill, D., & Shelley, M. (1984). Fresh ideas for

administration & finance. Carol Stream, Ill.; Waco, Tex.: Christianity Today; Word Books.

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What Questions can I answer for You?

559 256-0858-direct line

559 287-7840 cell phone

[email protected]