parsonage rent with a twist

[davidbwood]

we are currently renting the parsonage to our youth pastor for $1000 per month which would be a simple transaction to post however we have a member that is contributing to help him out with the rent. I set up a contribution account to cover the weekly donation but I'm not sure how it should be posted each month when the rent is paid.
Here's what I have so far
01-1110-000 Primary Checking debit $400 (YP check for rent)
01-4050-000 Parsonage Rent Income credit $1000
01-4878-126 Parsonage Rent Donation debit $600 (release from temporary restriction)
01-4999-000 Release from restriction credit $600
01-xxxx- ?????? debit $600
Is it as simple as debiting the parsonage rent donation income account? (01-4218-000) or do I have to set an expense account up for this - which seems like it would show a monthly expense that really isn't there.

As always your help is greatly appreciated.
Dave

[JohnDMeyers]

You would only release a restriction equal to an amount that is spent.

Since rent is an income, I don't see the need to release anything.

The youth pastor is contributing $400 of the $1000, apparently, and someone else is contributing $600, apparently. Here's how would do that:

DB 01-1110-000 $1000
CR 01-4050-000 $400 rent income from YP
CR 01-4060-000 $600 YP rent contribution

Note: You need to verify two things.
1) does the $600 count as youth pastor income?
2) is the rent help a tax-deductible contribution?

[NeilZ]

John ..

direct support of someone, such as a missionary, or in this case the youth pastor, is NOT a deductible contribution, per the IRS.

In order for the rental assistance to be deductible, it would have to be contributed to a church fund that anyone can contribute to, and that is used for general disbursement.

The $600 would be counted as income for Social Security purposes but not for income tax, however, this amount must have been declared as a parsonage allowance by a church board LAST year,otherwise it IS taxible for this year. You cannot retroactively declare this, but it must be done the year before the current taxable year, again this is per the IRS.

[davidbwood]

No the donation is not deductable as Neil mentioned and I let the member know that when he approached me about it. Also our YP has not yet recieved his credentials (though should within the next 60 days) so he does not have the duel tax status at this point. But thanks for raising that question because I hadn't even considered that it should be counted toward his income.

John - the donation is coming in $150 per week (February had 4 Sundays so 4x150=600) and is added up to be applied to the next months rent so your scenario is correct for March - YP writes check for $400 and the donations which have been adding up in the fund are added to that to reach the $1000 rent bill. However that $600 has already hit the checking account (01-1110-000) $150 at a time through weekly contributions so if I debited that again my balance would be incorrect.

I set up the "fund" for the donation for a couple of reasons: 1) that when I enter my weekly contributions they will balance with the deposit (this rent donation is part of the weekly donations from this member all on one check). 2) I have an easy way to track what has been contributed on a monthly basis so I can communicate to the YP what he owes for rent come the first of the month because there is the possibility that member may not make that donation every week. The parsonage rent is unrestricted money but until it is applied to the rent technically the donation is restricted which is why I am releasing prior to applying to rental income. As far as releasing a restriction "equal to an amount that is spent" wouldn't this be similar to buying say new tables for a Sunday School room with $600 being donated from a special offering and $400 coming from general funds to pay the $1000 bill? in that scenario I would release the $600 not $1000 because that would send the fund into a negative balance.

Maybe I'm making this too complecated from an accounting standpoint but I prefer to err on this side of more detail than less so that if there are ever any questions I can just print a report that clearly shows the paper trail.

[JohnDMeyers]

I see what you are doing.

Let me go through how I would set that up, using the restriction, which is ok according to the way I understand you are using it.



Contributions / Setup / Maintain List of Contributions
ADD
301
Donor gift toward YP rent
DB 01-1110-000
CR 01-4278-126 (restricted income account)

donor gives $150
donor gives $150
donor gives $150
donor gives $150

Now, you want to apply the $600 toward the $1000 rent, but it has already been recorded as income (even though it is restricted at this point, it is income).

01-4878-126 Parsonage Rent Donation debit $600 (release from temporary restriction)
01-4999-000 Release from restriction credit $600

And that's all you have to do. What happens is $600 moves from restricted equity to unrestricted equity.

When the YP gives $400:
01-1110-000 Primary Checking debit $400 (YP check for rent)
01-4050-126 Parsonage Rent Income credit $1000

If you change the sub-account on 4050 to match the restriction, you can run an Income/Expense report and filter for -126 to see both income pieces.

You can't do anything else with $600 or it would be seen as double-income.

If you try to move the income from 4278-126 to 4050-126 it will mess up your Changes-in-Equity report.

[davidbwood]

Thanks John - I very much appreciate your help. I will change the sub account as you suggested. I assume you meant to put
01-4050-126 Parsonage Rent Income credit $400 not $1000 when you wrote the transaction below otherwise I'm back to needing that $600 entry again because it would be out of balance otherwise.

When the YP gives $400:
01-1110-000 Primary Checking debit $400 (YP check for rent)
01-4050-126 Parsonage Rent Income credit $1000

[JohnDMeyers]

$400 is correct.