Required Minimum Distribution Contribution

[fbctnc]

Power Church Online

Please verify that I am entering this RMD correctly in contributions.

My church received a required minimum distribution check directly from the investment firm with a donor's name. It is my understanding that this should be entered thru the contribution module so that the donor can use this donation as a tax deduction when filing personal taxes. Entering this donation thru the contribution module will also ensure that this contribution amount will be listed on the annual contribution statement.

Please let me know if the RMD should be handled differently.

Thank you.

[CranfordUMC]

For your information:

When a RMD check is sent directly to the church from the investment firm, it cannot be declared as a tax deduction on the contributor's income taxes if they itemize. The reason to do this is so the contributor does not pay taxes on the withdrawal since they don't receive the money personally. It does however count towards their RMD. It saves on income taxes, however it is not a charitable contribution that can be deducted when filing their income taxes.

As far as entering the contribution is concerned, you could do one of two things. Enter it as a normal contribution and let the donor figure things out at tax time, providing they know the tax rules, or you could set up a new contribution fund for RMD contributions. You could indicate when setting up the fund that it is not to be included on their giving statement, or you could also include the new fund on the giving statement and certain statement forms show the different fund amounts. This way the contributor can separate the regular contributions from the RMD contributions. PC gives you many options.

I hope this helps, let me know if I can be of further assistance.
FYI...I give to my church this way. It saves on paying income taxes on the RMD withdrawal. I also end up using the standard duction at tax time.

[fbctnc]

"As far as entering the contribution is concerned, you could do one of two things. Enter it as a normal contribution and let the donor figure things out at tax time, providing they know the tax rules."

If the RMD is entered as a normal contribution, it will be listed on the annual contribution statement. Does the church have to contact the member to make sure the member knows the tax rules.

Thanks.

[NeilZ]

"As far as entering the contribution is concerned, you could do one of two things. Enter it as a normal contribution and let the donor figure things out at tax time, providing they know the tax rules."

If the RMD is entered as a normal contribution, it will be listed on the annual contribution statement. Does the church have to contact the member to make sure the member knows the tax rules.

Thanks.

I would not enter it as a normal distribution. I would create a separate Contribution Fund, tie it to the same income and asset account as normal tithes and offerings, but have it setup so it won't appear on the Contribution statement.

However, what I would also do is send a thank you letter letting the donor know you received the funds, but also give the IRS rules on why they cannot be shown on the Contribution statement as they are not tax deductible, and refer them to their accountant or tax preparer for more information.

[fbctnc]

What did you name the new contribution fund and do you only use it for RMD contributions.

Thank you so much for your help.

[NeilZ]

What did you name the new contribution fund and do you only use it for RMD contributions.

Thank you so much for your help.

I didn't do this, its a suggestion. However, you can use it for any type of tithes and offerings monetary contribution that should not be tax deductible. Frankly, since you're the only one who's going to see it, you can name it "non-deductible offering"

[fbctnc]

You are such a help. Thank you so much. I was going to name it Non Taxable Contribution, but I much prefer Non Deductible Offering.

I have another question. Secretary was wondering if the RMD check could simply be entered as a deposit through Fund Accounting and not run thru the contribution module. Why would you recommend or not recommend this? Coding would be the same: 01-1110-000 (bank account) and 01-4050-000 (Tithes & Offerings). Since I have a tendency to complicate things, she reminded me to KISS.

Thank you so much for your help.

[NeilZ]

You are such a help. Thank you so much. I was going to name it Non Taxable Contribution, but I much prefer Non Deductible Offering.

I have another question. Secretary was wondering if the RMD check could simply be entered as a deposit through Fund Accounting and not run thru the contribution module. Why would you recommend or not recommend this? Coding would be the same: 01-1110-000 (bank account) and 01-4050-000 (Tithes & Offerings). Since I have a tendency to complicate things, she reminded me to KISS.

Thank you so much for your help.

You want to be able to provide an audit trail for the contribution. Yes the donor can't 'double deduct', so to speak, on the contribution, but if there's a question in a few years (remember the IRS says you have to maintain contribution records for 5 years), you can pull up the donor's record and find the contribution.

In this case it is not so much overly complicating things, but covering the church to show that it was received and properly credited.

[fbctnc]

Thank you so much for the quick responses to my questions about RMD. I plan to set up a new contribution fund as suggested.