Mar 9, 09 • NewsNo Comments

I would imagine most people reading this blog are aware of the tragedy that took place yesterday at First Baptist Church of Maryville, Illinois. However, for those who have not read or heard the news, a gunman shot and killed the church’s pastor during the Sunday worship service. This particularly caught my attention because my family is originally from Southern Illinois and I still have cousins living in the area. In fact many, many years ago my father planted churches in the area with one of his church plants being in Maryville. I am emotionally connected to the area where this took place.

When things like this happen one often wonders what can be done. Here are two things:

First, we need to pray. We need to pray for the pastor’s family and for the church congregation.

Second, if you are involved in church administration I would recommend you review your church’s security measures. If you have never implemented security plans you might consider consulting with professionals knowledgeable about such things. Here is one:

But most of all, I think we need to pray.

Crisis Management

At our most recent monthly breakfast for church business administrators, Lawrence Swicegood offered great info on Crisis Management.  He runs Clarion Call Marketing.  Very insightful!  Everything from how to be prepared even before a crisis erupts, how to handle and how to do a "post mortem."  Topics, in outline form:

  • Everyone is Affected by a Crisis
  • Characteristics of a Crisis
  • Planning for a Crisis
  • Potential Crises for a Church
  • Developing a Response Plan
  • Internal & External Communications
  • Post Crisis Analysis

For more info, contact Lawrence ( or give us a call at PSK.

Picking up speed…

Feb 23, 09 • Fraud3 Comments

Because of our involvement in fraud prevention we make it a point to keep up with the latest news by periodically searching the web for news stories.  It seems like the pace of fraud occurrence is quickening. 

PSK is not involved in any of these situations so I have no idea about anyone’s guilt, innocence or the ultimate outcome of the cases.  But, I am sure of one thing; no church or ministry wants to make these types of headlines.

To avoid this kind of publicity we have been urging, almost pleading with churches to take this situation seriously.  A "clear and present danger" exists and every church should immediately perform an analysis of their current management structures to determine their vulnerabilities to fraud.

This does not have to be complicated.  For example, a great start would be to simply hold a brainstorming session with key employees and volunteers. The meeting agenda could be organized around a few key questions.  For example you could start with the revenue streams of your church:

What are our church's different sources of revenues? (Offerings, counseling fees, tuition, fund-raising events, etc.)

Do we have processes in place to effectively and safely account for ALL sources of revenues?

Who is involved in the money collecting, counting, recording, and depositing processes?

Reason for Benevolence Policy – Don’t Fall for Scam

Feb 17, 09 • Church Policy, FraudNo Comments

So a chaplain at the University of Dallas wanted to be kind and reach out to someone who seemed needy.  And now the Chapel at the University is $100,000 poorer!  See the article in the Dallas Morning News.

Your church needs to have a clearly written benevolence policy – AND it needs to be followed!  The policy should address questions like –

  • To whom will your church offer assistance?
  • For what reasons?
  • How much?
  • How many times?

By the way, you cannot offer assistance to anyone on staff or their relatives.  By law, that is taxable income that MUST be reported to the IRS!

So take care!  If you don't have a formal benevolence policy, give us a call – we'll provide help and a policy template.

Your Mission Trips and Homeland Security

Last week, we had a presentation here at PSK on this topic!  Homeland Security and the Patriot Act are musts when thinking about your church's Mission Trips.

Steve Tiemann was our speaker. He is an attorney who has lots of experience both as a lawyer and as a church member in this area.

Main points –

  • Know the guidelines.  The US Treasury has issued Anti-Terrorist Financing Guidelines.  Boring but an essential 16 page document to be aware of.
  • Know who you’re dealing with. In the foreign country, have intimate knowledge about the organizations and/or individuals you’re sending money to. You can check out the Terrorist Exclusion List (TEL) at the US Dept of State's website –
  • Know that the US Gov't is serious.  Federal law doesn’t allow you to use the excuse: I didn’t know!; If your church or organization inadvertently supports terrorists or terrorist organizations, you’re guilty!

Out-of-Pocket Expenses as Contributions!

Feb 5, 09 • Contributions1 Comment

Are you looking for additional charitable contributions for your tax return?  You – and so many other church members – very well might find a small bonanza here!

According to federal law, any un-reimbursed out-of-pocket expenses incurred while performing donated services may constitute a charitable contribution. The value of your donated labor or services is not deductible, BUT any un-reimbursed out-of-pocket expenses incurred while performing such donated services may constitute a charitable contribution for federal income tax purposes!

Examples of un-reimbursed out-of-pocket expenses that would relate to members who provide ministry services at your church are: 

  • Purchase of literature for religious education classes 
  • Building materials for repairing church facilities 
  • Transportation and travel expenses for mission trips, youth activities, chaperoning retreats, etc.

If un-reimbursed out-of-pocket expenses amount to more than $250, the church must issue an acknowledgement letter to the volunteer.

Also, Tax regulations stipulate that you “can claim a charitable deduction for travel expenses, necessarily incurred while away from home, performing services for a charitable organization only if there is no significant element of personal pleasure, recreation, or vacation in such travel. This applies whether the service provider pays the expenses directly or indirectly (i.e. through the church).”  The purpose of this more restrictive rule is to deny a tax deduction to persons who perform only nominal services for the benefit of the church while traveling or who are not required to render services for significant portions of a trip.

Email PSK if you want more info, or if you have other questions along this line.

1099s to Employees

Jan 15, 09 • Tax ReportingNo Comments

Oh no!  Two people came up with the same new way to ask an old question – besides the W-2 that I issue to an employee, can I give him/her a 1099 also, for special work done?

The answer is always the same – NO!

The new twist was this – Our minister sometimes receives stipends for services offered a church member (e.g., a wedding, funeral, baptism, etc.), but the check is written to the church.  Can I issue a 1099 for these funds, since it's not a part of the budgeted salary?  The answer is still NO!

Now if a member gives a stipend directly to a minister, that should be considered self-employment income and not reported on a W-2.  If you have it, see Richard Hammer’s book, Church and Clergy Tax Guide: 2007.  He’s a lawyer and CPA who’s an expert on church and clergy tax issues.  Talking specifically about fees received for marriages, funerals, etc., he says “such fees ordinarily will be self-employment earnings for the minister if received directly from the members, and not employee wages.” Page 181.

But if the church accepts a check from a member that's supposed to be directed to the pastor, and then transfers it on to that pastor, those funds need to be shown on the pastor's W-2.

End-of-Year Contributions

Jan 12, 09 • ContributionsNo Comments

Just got a call that most every church bookkeeper receives most every year.  At issue: how do I figure out in which period to post contributions received at year-end?

Answer: charitable contributions must be applied to the year in which they are delivered.  One exception is when the check is mailed: it is applied to the year the check is mailed (and postmarked!), even if received early the next year.

Remember, this is an issue because the donor wants to claim the contribution as a charitable deduction for income tax purposes.  The donor must relinquish control of the funds before it is technically a contribution.  So if the donor has not mailed it by year-end, no matter what date is on the check, he/she hasn't really given up control.  Or so the IRS says.  AND, the IRS also states that a mailed contribution must have been postmarked on or before December 31st - that proves that control is given up by the end of the year.

See the exact wording of the Dept of Treasury's official interpretation of the Internal Revenue Code on this subject:


Cash Contributions in Excess of $250

Jan 12, 09 • ContributionsNo Comments

In order for a Church member to claim a tax deduction for a cash donation in excess of $250, they must obtain written documentation from the Church acknowledging the gift. The acknowledgment from the Church must include a statement that the Church member didn't receive anything in exchange for this gift except for intangible spiritual benefits.  Canceled checks or bank statements do not constitute sufficient documentation for cash gifts exceeding $250.

The Church member must also be in possession of this documentation before the due date of the tax return that the deduction is being taken on.

These rules do not apply for cash donations that are less than $250 individually but exceed $250 in aggregate.  Canceled checks or bank statements would be adequate for these types of cash donations.  However, PSK recommends giving all members a written receipt for their donations whether or not any single donations exceed $250.

For example, Church Member A donates $100 per month for an entire year.  Although their total donations amount to $1,200, they could take a tax deduction for the donations as long as they have canceled checks or bank statements to substantiate the donations. 

Church Member B makes two $600 donations during the year.  Their donations also amount to $1,200 however Church Member B must have a written receipt from the Church in order to take a tax deduction for their donations.  Again, the receipt must include a statement that no goods or services were received in return for the donation except for intangible spiritual benefits.  Church Member B must also be in possession of the receipt prior to the due date of the tax return in which the deduction is included.

There is another set of rules for non-cash donations.

W-2’s for Ministers

As part of your year-end payroll processing tasks, you might have a question or two about reporting minister's earnings and allowances on Form W-2.  Maybe, you just need a refresher.  Here are the general topics that we receive questions about.

Salary – Salary paid to minister is reported in Box 1.

Federal Withholding – May or may not be zero.  Ministers are exempt from withholding requirements but may elect to have withholding.   Enter the amount withheld.

Social Security, Social Security Withheld, Medicare, and Medicare Withheld – Ministers are considered self-employed for purposes of Social Security and Medicare taxes so these boxes are blank.

Housing & Utility Allowances – Should be reported in Box 14.  Remember that housing and utility allowances should be officially designated by the church in advance. 

All other boxes on the W-2 are generally the same for ministers and non-minister employees.

The IRS has an example of a Minister's Form W-2 in its Publication for Clergy and Religious Workers.  See it at …

Also, there is a good IRS Publication for Churches and Religious Organizations that cover a variety of tax issues.  Check it out at …

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