Gifts to Pastor

[Kathie]

I have a member that gave a birthday gift for our Pastor. It was designated as a portion of a check they wrote that also included their tithes.

My question is: Where do I put this gift amount in my acct. sys.?

Do I enter it as a contribution fund and then when I write a check to him for the amount given, where does that come from? Is it considered part of his income?

There is something set up as "Pastor Appreciation" in income, but there is nothing in expenses to go with it in my chart of accounts. I will also need this information for when we take a collection for Pastor Appreciation Month. Is that handled the same way?

Thank you.

[NeilZ]

I have a member that gave a birthday gift for our Pastor. It was designated as a portion of a check they wrote that also included their tithes.

My question is: Where do I put this gift amount in my acct. sys.?

Do I enter it as a contribution fund and then when I write a check to him for the amount given, where does that come from? Is it considered part of his income?

There is something set up as "Pastor Appreciation" in income, but there is nothing in expenses to go with it in my chart of accounts. I will also need this information for when we take a collection for Pastor Appreciation Month. Is that handled the same way?

Thank you.

FWIW ... any gift to the Pastor is a 'pass thru' and should be handled as such. A separate check should be written to the pastor, and he has to declare such on his taxes.

Also, any such 'gift' IS NOT deductable by the giver, so it would not appear on their Contributions Statement at the end of the year for their taxes.

[Kathie]

So how would I record this amount then?

[NeilZ]

So how would I record this amount then?

In contributions, we setup a number range (above 100) for contribution funds that were used for items that were not tax deductable such as reimbursements for books, tickets, etc. Any gifts toward an individual were entered here, and these funds then updated the proper pass-thru accounts on the Funds Accounting side.

When the end-of-year statements were printed, we only printed those funds with numbers under 100.

[Kathie]

Thanks. I understand that now. On the expense side do I enter the check I write to him against his salary then or maybe "Bonus"? Or do I need a separate expense account?

I really appreciate your help. I am definately not an accountant!

[NeilZ]

Thanks. I understand that now. On the expense side do I enter the check I write to him against his salary then or maybe "Bonus"? Or do I need a separate expense account?

I really appreciate your help. I am definately not an accountant!

This is a pass-thru ... it would not be against salary, and definitely not Bonus. Remember this is not coming from the Church's operating funds, but are 'gifts' from an individual. As such, they are not part of the taxible compensation from the church, and should be listed separately by the pastor on his taxes.

What I would do is check with the church's financial advisor or auditor to be sure. And if the church doesn't have one, they should get one in order to assist in these areas, and to do annual audits.

[rporter1952]

In reading the discussion on Gifts to Pastor, I observed some opinions that I think need clarification. Instead of trying to explain I would like to suggest refrencing documents available from your denomination.

I am Southern Baptist and in Texas the BGCT has issued a document titled "Tax Guide For Churches" that has a section on "Taxability of Gifts". In this section, it explains that a love offering given through the church has two results. First, the gift is a decuctible contribution and the church needs to record this gift. Second, the gift is taxable income for the employee.

The document also explains that the "church should include the amounts in payroll and report as 'Wages' on Form 941 and on Form W-2."

This document gives other scenarios which are helpful for clarification. Please research examples from your own denomination for how to handle unique circumstances.

In general, for the gift to be non-taxable, the gift must be given directly to the the minister or employee. Once it is processed by the church it becomes an accountable item.

Regards,
Robert

[NeilZ]

In reading the discussion on Gifts to Pastor, I observed some opinions that I think need clarification. Instead of trying to explain I would like to suggest refrencing documents available from your denomination.

I am Southern Baptist and in Texas the BGCT has issued a document titled "Tax Guide For Churches" that has a section on "Taxability of Gifts". In this section, it explains that a love offering given through the church has two results. First, the gift is a decuctible contribution and the church needs to record this gift. Second, the gift is taxable income for the employee.

The document also explains that the "church should include the amounts in payroll and report as 'Wages' on Form 941 and on Form W-2."

This document gives other scenarios which are helpful for clarification. Please research examples from your own denomination for how to handle unique circumstances.

In general, for the gift to be non-taxable, the gift must be given directly to the the minister or employee. Once it is processed by the church it becomes an accountable item.

Regards,
Robert

Not necessarily accountable by the church. The IRS has said that gifts made to directly support a person, are not tax deductable.

At the church I cited above, the Stewardship Elder, who is a CPA, agreed with the procedure we followed. A 'birthday gift' designation, even though the check is made out to the church, is not a donation to the church, but to a specific individual. This is a case where it is a 'pass thru' and the donation is not tax deductable. As noted above, this is tracked in both the contributions as a 'non-taxable' fund, and in the accounting as a 'pass thru' account which only function is to handle the transfer of the monies, nothing else.

As is noted, each denomination may have a different way to describe such 'gifts', but in the end, the IRS rules must be the ones followed. Again, check with your accountant/auditor to verify what you should be doing.

[Kathie]

I appreciate all of the input. I have incurred another problem with this contribution. The gift has already been posted into the Pastor Appreciation fund and a check written to the pastor. He returned the check and asked that the money be put into the Church Restoration Fund. I voided the check (which in hindsight was probably not what I should have done).

Now I don't know how to get the money into the Restoration fund. He would prefer that the donors not know he didn't keep the money and if I do a correction in the contribution module to put the money in the restoration fund, it will show up on their year-end statement.

Also, since he didn't keep the check, does he need to still include that amount in his earnigs?

[NeilZ]

I appreciate all of the input. I have incurred another problem with this contribution. The gift has already been posted into the Pastor Appreciation fund and a check written to the pastor. He returned the check and asked that the money be put into the Church Restoration Fund. I voided the check (which in hindsight was probably not what I should have done).

Now I don't know how to get the money into the Restoration fund. He would prefer that the donors not know he didn't keep the money and if I do a correction in the contribution module to put the money in the restoration fund, it will show up on their year-end statement.

Also, since he didn't keep the check, does he need to still include that amount in his earnigs?

The donor's probably do not need to know where it went. This part of the transaction can probably be done entirely in the Funds Accounting module.

Not knowing how your COA is setup, I would say that if the Pastor's Fund, and the Restoration Fund are under the same COA, you can just create the transactions to move the money within that COA.

Otherwise, you could use a transfer account to move the money.

In this way, the donor's have their proof of donation, the pastor can return the money to the church for its use, and the restoration fund will show an increase in its account balance.

[Kathie]

They are both in the same COA. Can I just debit one fund and credit the other in the fund module or do I need to pass it through the main checking account as 2 transactions?

Thanks for your help. I really appreciate it.

[NeilZ]

They are both in the same COA. Can I just debit one fund and credit the other in the fund module or do I need to pass it through the main checking account as 2 transactions?

Thanks for your help. I really appreciate it.

I don't claim to be an expert, but since from your discription, you have one bank account where all the money is deposited, just the proper debit/credit transactions would suffice.