CPA's & Consultants Providing Business Insight To Churches & Ministries

Controlling the donation…can this be done by a donor?

Gifts that are designated by a donor for a specific person through a ministry are not allowed and could endanger the ministry’s tax-exempt purpose as well as enable the donor to break the law. These types of gifts are known as “earmarked” gifts. How can a ministry identify an earmarked gift? According to Dan Busby in FOCUS On Accountability there are three tests to identify these types of gifts.
1. Does the gift benefit an indefinite group? If a gift is restricted for one person, then it fails this test.

Fill ‘er up

A church has decided to purchase gas cards, valued at $20 each, to give to their employees who make less than $30,000/year. The church will do this for several weeks. Is there a tax implication to the church’s employees?

YES and this is why…

This is considered a taxable fringe benefit according to Treasury Regulation 1.132-6(c) because the items given are gift cards. Any cash or cash equivalents (gift certificates, charge or credit cards) are considered taxable fringe benefits.

Reimbursement of Travel Expenses

A ministry typically reimburses travel costs incurred by employees performing ministry projects. In order for the Ministry to reimburse these costs, what is the reimbursement period and what is the employee required to do?

Compensation Planning for 2007 (3 of 3)

Housing Allowances…A great tax benefit to Ministers

One of the most important tax benefits available to ministers who own or rent their homes is the housing allowance. For churches who provide a parsonage, the minister may receive a parsonage allowance for designated expenses of the parsonage. These allowances must be designated in advance by the employing church. According to the 2007 Compensation Handbook for Church Staff, co-authored by James F. Cobble and Richard R. Hammar, a housing allowance represents:

1. compensation for ministerial services,

Compensation Planning for 2007 (2 of 3)

In adopting a compensation package for 2007, churches may consider including a salary reduction agreement as part of the minister’s or lay staff’s compensation. According to the 2007 Compensation Handbook for Church Staff, co-authored by James F. Cobble and Richard R. Hammar, salary reduction agreements are used to handle certain staff expenses. The objective is to reduce a worker’s taxable income through salary reduction agreements specifically allowed by law. These allowances include:

1.Tax-sheltered annuity contributions

2.Cafeteria plans

3.Housing allowances

Compensation Planning for 2007 (1 of 3)

It's that time of year. Yes, compensation committees and church boards should be preparing for 2007 and adopting the compensation for employees. In adopting a 2007 compensation package for ministers and lay staff, consider salary as the most basis component of a compensation package. The amount of the salary should be set by the church board and documented in the minutes prior to payment. The compensation package may include salary reduction agreements (ie., various "plans" available for employees).

Communicating Internal Control Matters – (2 of 2)

As a recap from Communicating Internal Control Matters post #1 of 2, the AICPA Statement on Auditing Standards (SAS) No. 112, Communicating Internal Control Related Matters Identified in an Audit - establishes new standards relating to the auditor's responsibility to communicate to an entity's management and to individuals charged with the entity's governance significant deficiencies and material weaknesses identified during the course of an audit of the entity's financial statements.

Communicating Internal Control Matters – (1 of 2)

For auditors of financial statements, the AICPA has issued a new auditing standard effective for periods ending on or after December 15, 2006.

AICPA Statement on Auditing Standards (SAS) No. 112, Communicating Internal Control Related Matters Identified in an Audit - establishes new standards relating to the auditor's responsibility to communicate to an entity's management and to individuals charged with the entity's governance significant deficiencies and material weaknesses identified during the course of an audit of the entity's financial statements.

New accounting standard requires entities to record obligations associated with postretirement plans

According to the FASB website
The Financial Accounting Standards Board has published FASB Statement of Financial Accounting Standards (SFAS) No. 158 (SFAS No. 158), Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, to require an employer to fully recognize the obligations associated with single-employer defined benefit pension, retiree healthcare, and other postretirement plans in their financial statements.

IRS updates deposit requirements for employment taxes

According to RIA Payroll Guide Newsletter (preview) 11/10/2006, Volume 65, No. 23 the IRS has revised Notice 931, Deposit Requirements for Employment Taxes, for 2007. The notice provides information on deposits of Social Security, Medicare, and federal income taxes.

For electronic deposit requirements - all depository taxes (e.g., employment tax, excise tax, and corporate income tax) must be made electronically in 2007 using the Electronic Federal Tax Payment System (EFTPS) if:

(1) an employer's total deposits of such taxes in 2005 were more than $200,000, or