It's that time to when we start collecting our information in preparation to "render to Caesar the things that are Caesar's". Modeling the gospel is as important as preaching it. As inconvenient and as unfair as some government regulations may seem, I am constantly reminded that God requires us to obey the laws of the land.
Below are a few tips, guidelines, and pitfalls to avoid so that you continue to walk in excellence in this area.
- You will need to send out contribution statements to everyone who gave a single contribution of $200 or more. The IRS no longer accepts cancelled checks as support for the donation.
- Remember that donors can only deduct on their tax returns amounts given to a recognized charity, that is, your church or your separate ministry that has gotten tax exempt status from the IRS. Of course some donors may not be aware of this rule and may indeed attempt to deduct such amounts. In so doing, they open themselves and YOU up to audit by your state or the IRS. Most audits of a minister will most likely also result in an audit of the ministry.
- You must refrain from paying for personal expenses of any kind from the church finances. If you need more income, ask your Board to consider an increase in pay. Consider the story of the pastor one of the oldest and most prominent black congregations in his city. The local paper recently reported that he used church credit cards to pay for at least $122,000 in personal expenses over a three-year period, including jewelry, family vacations, clothing and auto supplies. The spending came to light during the course of an independent audit and investigation of his financial affairs. It was a very embarrassing situation for a church that has done a lot of good in the city.
- If you chose to have your honorarium checks from your outside speaking engagements made payable to your ministry or church rather than to you personally, know that if the funds are ultimately transferred to you, you must still report the earnings as income. However, if you simply allow the ministry to pay directly for your ministry related travel and other non- ministry related expenses, this is not taxable income.
If you qualify to have all or a portion of your salary designated as a Housing Allowance, remember the following:
- It is not totally tax free; you must pay self-employment (social security) taxes on the amount. I have seen so many ministers get into hot water with the IRS after several years of assuming that the allowance was tax free only to find themselves with a huge tax bill.
- The allowance must be approved and reflected in the minutes of the Board meeting prior to being paid; you cannot wait until the end of the year and establish the amount. It's best to have the allowance approved in December of the prior year or at least before you receive the first payment in January. You can always adjust the amount as long as it is done in advance.
About the Author
Deborah Pegues is an experienced certified public accountant, a Bible teacher, a speaker, and a certified behavioral consultant specializing in understanding personality temperaments. As well as the bestselling 30 Days to Taming Your Tongue (more than 375,000 sold), she has authored 30 Days to Taming Your Finances and 30 Days to Taming Your Stress. Deborah is an ordained minister and also holds a masters degree in business finance from the University of Southern California. She and her husband, Darnell, have been married for nearly 30 years and make their home in Los Angeles.