Love Offerings

[dharkey]

We have a new pianist at our church. She agreed to come without pay. We are giving her love offerings to defer her travel expenses. I have a contribution account set up - 01-4120 Misc. Love Offering. Where should I set up an expense account to keep track of how much the church has given her. I have an account under salaries 01-5110-000 Pastor's Love Offering. Should I set up a similar account for the pianist? Since it is a love offering, would I need to go through payroll? Thank you for your help.

[NeilZ]

We have a new pianist at our church. She agreed to come without pay. We are giving her love offerings to defer her travel expenses. I have a contribution account set up - 01-4120 Misc. Love Offering. Where should I set up an expense account to keep track of how much the church has given her. I have an account under salaries 01-5110-000 Pastor's Love Offering. Should I set up a similar account for the pianist? Since it is a love offering, would I need to go through payroll? Thank you for your help.

First off, any such Love Offering should be made to the Music Ministry of the church, and not setup to directly support the pianist. This is because the IRS has rules about if such direct payments are deductible by the donor ... they're not. I'm not saying you shouldn't track how much comes in, but it should go into the general fund of the church.

Then, is she an employee? Then any payment should flow through Payroll so the proper taxes are withheld. A church has to pay Social Security/Medicare employment taxes, and deduct withholding.

However, if she's acting as a contractor, you should pay her through the Accounts Payable, and issue her a 1099 at the end of the year to cover what was paid to her. Then the onus of tax liability (Fed Income Tax along with Self-Employment Taxes) is on her.

Frankly, having to deal with the Self-Employment tax issues is a pain, I would advise her to go with the payroll & deductions route.