Free parsonage rent to non-minister

[Flemingtl]

I have a question about our church parsonage. Our pastor decided to buy his own house instead of living in the small house on the church property. We have a member that cares for the property, including remodeling the house, that has been living there all year.
We were just informed that we need to issue him a 1099 for the FMV of the rent that he is not paying even though he has been taking care of the property.
My questions is, what should the transaction look like when I put that invoice into PC+ ver. 11.1 to generate a 1099 since there wasn't any money exchanged?
Also, anyone know of a legal and better way around this since he is now going to have to pay taxes on his side of the agreement?

Thanks for your input,
Terry

[NeilZ]

I have a question about our church parsonage. Our pastor decided to buy his own house instead of living in the small house on the church property. We have a member that cares for the property, including remodeling the house, that has been living there all year.
We were just informed that we need to issue him a 1099 for the FMV of the rent that he is not paying even though he has been taking care of the property.
My questions is, what should the transaction look like when I put that invoice into PC+ ver. 11.1 to generate a 1099 since there wasn't any money exchanged?
Also, anyone know of a legal and better way around this since he is now going to have to pay taxes on his side of the agreement?

Thanks for your input,
Terry

I don't believe this should be put in Powerchurch. As you said, there is no money exchanging hands. Unlike a minister, where you would issue a W-2 to reflect the Manse Allowance FMV along with the salary; or a contract employee where you would issue a check and have records to print on a 1099 from Powerchurch; there really isn't anyplace you could enter this type of data.

I would just write out a manual 1099 by hand.

That said, I would definitely check with a tax adviser for exactly how to handle this.

[Flemingtl]

Neil, thanks for the reply but I got an email reply from another source that conflicts with it:

They said that it doesn't follow "generally accepted accounting principles, or at least this specific principle. While it is not a problem to manually do the forms, a church cannot issue a 1099, file a 1096 and not record it in the books. There is no paper trail; every document must be able to be traced back to the books, especially an IRS form."

[NeilZ]

Neil, thanks for the reply but I got an email reply from another source that conflicts with it:

They said that it doesn't follow "generally accepted accounting principles, or at least this specific principle. While it is not a problem to manually do the forms, a church cannot issue a 1099, file a 1096 and not record it in the books. There is no paper trail; every document must be able to be traced back to the books, especially an IRS form."

Then I'd ask them how to enter a non-income,non-expense, non-liability, non-asset transaction into a double entry accounting system.

FWIW .. when you're filling out a W-2 for a manse, and there really isn't a manse allowance but the minister has to pay SE tax, the only paper trail item for this is the dollar amount that is entered in Block 14, its not kept in Powerchurch. The source data is the annual minister's call that is approved by the local congregation. Now if you have a piece of paper in your church files with the agreement on the use of the manse, that would cover the paper trail.

[Flemingtl]

Neil, thanks again for your help!
Just playing with a backed-up file in PC+, here is a transaction I put in:

Invoice Person in house:
Credit=01-31110-000 Unrestricted Net Assets = $650
Debit=01-5761-050 Rent Not Received =$650 (detail account under "Parsonage Expense Group")

I then checked the new Balance Sheet report and this did not affect any balances on it at all, including the Unrestricted Net Assets balance.
I checked the Income and Expense statement and it shows the $650 expense for "Rent Not Recvd."

I checked this person's vendor record and it shows that a 1099 will be printed for the $650 and it can either be selected as Box 1 Rents or Box 7 Non-Empl.

Will this work and/or be proper accounting for this problem?
Thanks again,
Terry

[Flemingtl]

Looking at this again, I don't think it's proper for the Inc/Exp Stmnt to show an expense as paid that actually wasn't. I went in and reversed the transaction in the Fund Acctg module only and that got rid of the expense on the Inc/Exp stmnt but it left the amount on the 1099 that will print for him.
Is this acceptable or am I missing something else?
Thanks,
Terry

[NeilZ]

Looking at this again, I don't think it's proper for the Inc/Exp Stmnt to show an expense as paid that actually wasn't. I went in and reversed the transaction in the Fund Acctg module only and that got rid of the expense on the Inc/Exp stmnt but it left the amount on the 1099 that will print for him.
Is this acceptable or am I missing something else?
Thanks,
Terry

Actually, thinking about it ... yes. You have the 'paper trail' that you need.

[Flemingtl]

Just so I know, what am I leaving behind in Accounts Payable by only reversing this transaction in Fund Accounting? (Other than showing that we paid him a check for unpaid rent when we really didn't.)

Thanks,
Terry

[NeilZ]

Just so I know, what am I leaving behind in Accounts Payable by only reversing this transaction in Fund Accounting? (Other than showing that we paid him a check for unpaid rent when we really didn't.)

Thanks,
Terry

You're leaving a Vendor Record showing the transaction there so a 1099 can be filled by the system.