Guidelines for church finances in the new year
1. Prepare for Your Annual Board Meeting.
We recommended holding a board meeting at least once a year. This yearly board meeting is a time to discuss important issues, such as the addition or removal of a board member or officer and the approval of policies that need meeting minutes to back them up. Board meetings don’t have to be a source of stress. To make running your board meetings easier, we have created resources that can help.
2. Review Policies.
There are a couple of items to review: First, include the annual review and approval of compensation agreements. Secondly, include the designation of housing allowances with current pastors. Other things to include would be a cell phone policy and accountable reimbursements.
3. Review Filing Requirements and Annual Reporting for Your State.
We cannot stress this enough. Failure to file a report with your state every year (depending on your state’s requirements) may result in the state dissolving your church or ministry.
4. Get Your Important Financial Documents in Order.
We recommend gathering your statements, outline a budget for next year, and review this past year financially. Be sure to check for any areas where you grew financially. You will be able to see what accommodations should be made in your budget for the following year.
5. Prepare Love Offerings and Honorariums Documentation.
Be sure to notify pastors and staff who received any love offerings or honorariums that they will be added to their W-2 as compensation. (To be clear, love offerings are considered taxable income by the IRS.) This includes non-cash gifts, except for a gift with a value so small that it would be unreasonable or administratively impracticable to count. This type of gift is called a nontaxable de minimis fringe benefit.
6. Review Reimbursements.
For any reimbursements requested throughout the year, make sure you have followed your accountable reimbursement policy in documenting these expenses. These financial documents will be essential for either your bookkeeper or data entry specialist.
7. Notify Your Congregation.
Make sure your congregation knows that all giving for 2020 must be postmarked or received by the church no later than midnight on December 31, 2020. Let them know that any donations given after this date will be included in next year’s giving statements.
8. Track Your Giving Statements.
Giving statements must be given to anyone whose total donations exceeded $250 in the year. These statements can be printed or emailed directly from most donation tracking platforms, including our very own Kingdom Steward.
9. All Employees Should Review and Update Their Form W-4s.
This is the form they would have filled out when they were hired. It’s helpful to review this form to ensure information is still accurate. When employees have gone through significant life events such as marriage or the addition of a new family member, their tax withholdings may be altered, so be sure to update those documents for accuracy.
10. Give a Gift for the Season.
While there are some guidelines, Section 74 of the Internal Revenue Code provides that churches and ministries can give a tangible gift to an employee, including pastors, as long as it meets the requirements of a qualified employee achievement award outlined in sections 74 and 274(j). When giving a gift, make sure you meet the following criteria:
• The program is in writing, and awards are given under conditions and circumstances that do not create a significant likelihood of it being disguised compensation.
• The award is tangible property, such as tablets, laptops, desks, etc. The item cannot be travel, vacations, meals, lodging, theater or sporting event tickets, stocks, bonds, or other securities.
• The award is for length of service (after every completed fifth year of service) and is given as part of a meaningful presentation or ceremony. The award generally cannot surpass $400 in value.
First published on StartChurch.com. Used by permission.