What Does Your Receipt Say About Your Church?

Getting this right says a lot about the administration of your church. Good stewards pay attention to the details and sweat them out so that those they serve will not have to. Can your congregants rest assured that the receipt you send them is IRS proof? Are you certain your receipt is fully compliant? Let me give you the do’s and don’ts of contribution statements.

1. Do make sure the name and address of the giver is correct: Believe it or not, many contribution statements have typos on the name and address. Before printing the contribution statements, review the names and addresses of your givers and make sure the information is correct.

2. Do give them out on or before January 31st: By the end of January, most taxpayers have received their W-2, 1098, 1099-misc forms, and other tax-related documents. In order for a taxpayer to deduct what they gave to the church they must receive their contribution statements before they file their tax returns. As a matter of practice, it is usually a good idea to make a public announcement that their statements will be issued by January 31st and that they should wait on filing their tax return until they receive the statement.

3. Do give a special acknowledgement when a donation is for $250.00 or more: Make sure you include the four pieces of additional information.

4. Do state whether each item is deductible: When your church issues a contribution statement, it normally lists the date of each contribution, the fund to which it was given, and the amount given. As a matter of clarity, your itemized contribution statement should state whether each item is deductible. There are some instances when a person makes a donation that is not tax deductible. Item 10 explains when a donation is not deductible.

5. Do not give a tax-deductible receipt for donated property: There are times when a person gives personal property to the church as a donation. In order for the giver to get a tax deduction, he/she must receive written acknowledgement from the church. See item six.

6. Do not estimate or appraise donated property: Section 170(f)(8)(b) and IRS regulation 1.170A-13(f) states that the written acknowledgement the church issues to the giver must not state the value of the donated item. In other words, the church is only allowed to give the donor a letter describing in detail the property that was donated and whether the church is able to use it to further its exempt purposes.

7. Do not give a receipt for donated time and services: Many churches this year will give a contribution statement to individuals who donated their time and services to the church. Though serving the church in this way is a noble thing, the tax code does not allow such individuals to receive a tax deduction for donated time and services.

8. Do not give a receipt for donated rent: Last year many pastors asked me if they were allowed to give their landlord a contribution statement for the discount he/she gave the church on the rent. This, too, is not tax deductible and the church must not issue a contribution statement for reduced rent.

9. Do not give a receipt for a donated car: If someone donates a car to your church, do not list the contribution in the normal contribution statement. In order for the donor to get a deduction, the church must give the donor a letter (contemporaneous written acknowledgment) that meets the requirements of section 170(f)(12). The letter must display the donor’s name, address, Social Security number, vehicle identification number, and whether the church will use the car, give it to a needy family, or sell it. In lieu of the letter, the church can give the donor copy B of form 1098C.

10. Do not give a deductible receipt for a restricted donation: There are times when a donor makes a contribution to the church, but with strings attached. If a donor donates a gift but maintains control over how the church uses the gift, it is not tax-deductible. In keeping with item 4 above, you can list the contribution, but list it as not deductible.

Source: StartChurch.com

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Deadline for Churches

Many churches use credit card readers to process various transactions such as conference or retreat registrations, weekly giving, and purchases made within a bookstore or cafe that the church may operate. Because of this, churches need to be aware of the fast approaching October 1st deadline.

New credit card readers required

In an attempt to greatly reduce credit card fraud, all merchants, both large and small, including churches, will be required to implement a new credit card reader system by October 1st, 2015.

Named after Europay, Master Card, and Visa (EMV), the new EMV cards include a computer chip embedded in each card, which creates a unique transaction code upon each use, thus making it much more difficult for one to make fraudulent purchases. The “magnetic strip” credit cards used prior to EMV cards posed a problem in that when someone copied the magnetic strip on a credit card, he or she could easily replicate the data it contained over and over again because it did not change.

The current “swipe machines” that read the magnetic strip on credit cards will need to be replaced with new credit card machines that accommodate EMV cards, which has become the new global standard. Instead of “swiping” the EMV cards, they will simply be “inserted” (similar to that of an ATM machine) into the new credit card readers. Once inserted, the credit card machine will read the computer chip, authenticate it, and then require either a personal identification number (PIN) or a signature from the card holder.

Because the United States is leading the world in credit card fraud, the EMV card will eventually replace the credit cards with magnetic strips. Perhaps you may have already received an EMV card since many banks and financial institutions have already begun the process of distributing these new cards. Smart Card Alliance even estimates that by the end of 2015 an additional 600 million EMV cards will be issued across America.

A shift in liability

Now, maybe you are wondering how this deadline affects churches. What are the consequences for not complying with the requirement for new credit card readers? Well, traditionally, when fraudulent charges appear on one’s credit card, either the bank or the financial institution that issued the card takes responsibility for the fraud. However, beginning on October 1st, 2015, the liability will shift to those who still choose to use the older credit card systems.

This means that if your church processes a payment using an older card reader and someone gains access to that credit card information, the church will be liable if fraud is traced back to the church.

Perhaps you are thinking, “My church doesn’t even currently use credit card readers, so why should we be concerned?” Well, I believe that the more you know, the better. Even if your church does not use credit card readers, you should plan to protect what God has given your church. For many churches, any size fraudulent charge on the church’s credit/debit cards could be a tremendous setback. I want to encourage you, if you have not already received an EMV card from your church’s bank or credit card company, contact them requesting to receive a new EMV credit/debit card.

What to do moving forward

How do you go about making this change? If your church uses credit card readers then you should have been (or will be) contacted by the organization that provided you with the credit card reader. If you have yet to be contacted, do not hesitate to reach out to them and inquire about the steps you should take in order to make this adjustment by October 1st. It is important to note that this also goes for the mobile card readers that can be used with smart phones and/or tablets.

I believe it is safe to assume that churches want to protect their members’ privacy. Additionally, I believe that members of churches expect their donations and other transactions completed at the church to be secure. Therefore, do not hesitate to make any necessary changes that benefit the security of your members.

Source: StartChurch.com

Verifiable Accountability

Verifiable accountability is not a suggestion. It is the principle Jesus taught the disciples—and us! Jesus set the verifiable accountability example when He sent out the disciples two‐by‐two in Mark 6, the 72 in Luke 10, and others involved in the early church mission, as recorded in Acts.

When one thinks of accountability, it is natural to focus on finance‐related issues; raising resources, accounting for and managing resources, and disclosure of financial information. But accountability starts with a church’s governance—carried out by the clergy and the governing body.

As Ravi Zacharias said: “History is a grim reminder of what happens to those who think they have no law but themselves.”

– Dan Busby, ECFA

Ministry Leadership and Church Development