Dear Southwest District family,
It’s probably safe to say that 2015 has been a year characterized by both financial victories and challenges in our nation and for many individuals within our congregations. Recent legislation like the Affordable Care Act (i.e. Obamacare) and all of this has a measurable affect on charitable giving and church operations. As you probably know, new tax laws, the timing of their implementation and the understanding of how they will affect each citizen seem to be in a constant state of change and uncertainty…but it’s comforting to know that the kingdom principles that Jesus taught us never change and come with His divine guarantee!
We know that paying our fair share of taxes is biblical. Even Jesus paid the temple tax and taught us to “give to Caesar what is Caesars’ and to God what is Gods’.” Yet Psalm 112 also says that one who delights in the Lord will “manage his affairs with discretion.”
Here are some practical notes and tips for you and your congregation how to employ principles of good stewardship over the resources that God has entrusted to our care:
A payment by check is deductible in the year the check is mailed (postmarked before the end of day on December 31, 2015) or unconditionally hand-delivered to the church, by that same date. If a large contribution is mailed on December 31, it is also advisable to use certified mail and retain the receipt as documentation that your contribution was made before the end of the year.
Donors must substantiate individual cash contributions of $250 or more “by a contemporaneous written acknowledgment of the contribution by the church. Donors cannot substantiate individual cash contributions of $250 or more with canceled checks. They must receive a written acknowledgment from the church or other charity.
A great way to make sure your end-of-year donations make the cut-off is to utilize online giving. For business owners or investors expecting an influx of income in the first part of the year, electronic giving provides a great option to maximize your tax deductions this year for income anticipated in early January 2016. The district office can guide you to some great options for implementing electronic giving in your church, including the use of “ipad kiosks” and “apps” for smartphones.
Encourage your people to consider donating appreciated assets. Donating property that has appreciated in value, like stocks, can result in a double benefit. Not only can you deduct the fair market value of the property (so long as you’ve owned it for at least one year), you avoid paying capital gains tax. Normally, appreciated property is subject to capital gains tax at disposition. There is an exception for donations to charitable organizations: donors escape paying capital gains tax altogether.
Donating stocks, bonds or other monetary instruments
Stocks, bonds, annuities and certain other financial instruments (owned for more than one year) can be donated directly to the church.
Investors desiring to make donations to the church, but stand to incur tax consequences for cashing out these investments, may benefit greatly by donating their stock directly and allowing the church to cash out the investment. Doing so provides the following benefits:
· The donor gets a tax deduction for 100% of the market value of the asset, and does not have to pay (the often hefty) capital gains tax on the appreciated value.
· The church gets to cash out the asset for the higher value and also does not pay taxes on it because of our non-profit status.
· These transfers are usually very east to execute and made simply by filling out a form.
Donors in the higher income tax brackets will face some important planning decisions as 2015 closes. Consider the following possible strategy:
· Transfer assets to the church through a Charitable Remainder Trust. A charitable remainder trust (CRT) is a private fund that you set up and contribute to. It provides you or the beneficiaries you select with taxable income for a certain number of years, or for life. Money that's left over—the "remainder"—passes tax-free to one or more charities of your choosing. The significant benefit of these tools is that your contributions (of cash, investments or property) are tax deductible, based on the amount of money projected to go to charity and can be used to offset your taxable income distributions from the trust.
· For more information about these options, visit Foursquare Financial Solutions planned giving website at: http://pg.4sqfs.org/
For Pastors: If you need advice on how to facilitate receipt of a stock donation to your church, please contact the District Office and we can send you information on options to process this donation.
Please be aware: Volunteers cannot deduct the value of their time. The IRS does not allow a charitable deduction for volunteering your services (even professional services). The good news is that (unreimbursed) out-of-pocket expenses relating to volunteering at church directly connected with your volunteer services are usually deductible. Such out-of-pocket charitable expenses that might be deductible include the cost of transportation (including parking fees and tolls); travel expenses while you are away from home performing services for a charitable organization and supplies or materials used in the performance of your services. As with other donations, keep good records since documentation is key.
Tax deductions for mileage when volunteering at church
People who volunteer their time at church (or with other charities) may deduct $0.14 per mile on their federal tax return for the mileage driven in their personal vehicle to and from church. The IRS still requires contemporaneous records (such as a mileage log) showing odometer readings, date of travel, charitable purpose etc. In many cases the IRS has accepted MapQuest printouts in lieu of odometer readings. This only applies to those who are serving as a volunteer on the date of travel and who are not compensated in any way by the church/charity.
Other planning tips for 2016
As we move into 2016, the political climate affecting churches is changing. It is more important than ever for churches in the US to ensure that their policies and procedures comply with local, state, and federal employment laws. Financial matters often contribute to the top reasons churches and religious organizations end up in court each year. Here are some important planning tips to help your church stay above reproach and ensure that your time and energy can stay focused on mission:
· Send out 1099’s – IRS Forms 1099 along with transmittal form 1096 is required to report any compensation of $600 or more for services rendered by a non-employee. This includes any payment for services like: honorariums, stipends and appreciation gifts to non-staff workers. Churches must file copy A (red) of all paper forms by February 28 or E-file their 1099’s/1096 by March 31. Please note that many individuals file their tax returns well in advance of those dates, and the vendor copies are due by January 31. For more information on how to generate 1099’s through QuickBooks, see the tutorial video available on the administrative toolkit: QuickBooks and The Foursquare Hub Resources
· Renew Housing allowances – As a best practice, and to ensure maximum benefit we recommend that all ministers submit a revised housing allowance to be approved and documented in the church council minutes before January 1st of each year. For information about the ministers housing allowance and compensation for ministers, see the Church Compensation Practices video series: Church Compensation and HR Practices – Module 2. You can also find forms, sample letters and other housing allowance resources here: Employee Forms.
· Budgeting and planning & retooling your financial systems – As you approach the end of the year, consider taking advantage of the many budgeting and planning tools that are now available: QuickBooks and The Foursquare Hub Resources. These resources have been strategically designed to help pastors and their teams to organize their financial information for easy integration with the Foursquare Monthly Church report while maintaining great flexibility to customize reporting to fit your church.
· In-service training for your staff - The beginning of a new year is a great time to sharpen your ministry skills by training together as a team. Consider using some of the new training resources available here: Administrative Training Video Series.
No matter what happens with economies, governments, laws or taxes we can rejoice in the knowledge that God’s kingdom continues to thrive. In the words of John the Apostle “His commandments are not burdensome. For whatever is born of God overcomes the world. And this is the victory that has overcome the world—our faith.”
May God lead you into new levels of victory in 2016 and beyond!
Southwest District Administrator