Be Careful when Claiming Charitable Contributions

Over the years our Government and the Internal Revenue Service (IRS) has stripped away at our allowable deductions for income tax purposes. The supposed reasoning was to streamline the tax code and bring more revenue into the Government coffers. However, the tax code has not been streamlined or simplified, and regardless of the amount of revenue, the Government continues to outspend income.

One of the few deductions remaining for the average tax payer is that of Charitable Contributions. Churches depend on the money donated to them on any given Sunday to offset their weekly budgets, and the generosity of so many who donate to Churches and Ministries, are motivated by the fact that they are still allowed to deduct those gifts from their annual income tax return.

With all of this said, there are some issues of which we need to be aware.

Do Not Earmark Donations for Specific Individuals

Private Inurement is a “no no” for Churches. The Inurement clause states that Churches are not allowed to benefit private individuals. According Eric Roberts from the IRS, if anyone earmarks a donation for a private individual, the donation will not be allowed.

The Church counting office or Treasurer should have a rubber stamp that declares, “Not for Contribution Credit,” and every donation earmarked for benefitting an individual should be clearly documented as such.

Giving donation credits to individuals who are not authorized them, may invoke civil and criminal penalties to the responsible parties of that particular Church. Do Not Test the Waters, or Seek to Circumvent This!

Do Not Allow Bartering

A common practice within Church circles is people, especially Church members, who will buy items for the Church, donate them, and then want contribution credit. This practice may be costly for the Church and/or the individual.

Do not allow people to purchase flower arrangements to place on the pulpit for Sunday service and then want contribution credit. Do not allow them to buy supplies, equipment or donate time, for contribution credit. Instead, have them donate the dollar amount of the item or supplies they want to give the Church and then the Church make the purchase. This may seem a little asinine, but it will protect all parties, and the dollar donation amount (unless earmarked for the benefit of a specific individual) will be an allowable deduction.

If they insist on giving the item, instead of cash, only write a letter describing in entirety what was donated. Do not place a dollar amount on the letter. Leave any amounts to be determined by the individual and his or her tax preparer.

Make sure that all donations are either, Tithes, Offerings, Mission Fund, or Building Fund. Do not think you can slip something by the IRS. They know what to look for on a tax return. Cheating on your donation credit is not going to reduce your tax liability enough to make it worth you going to prison. “Give to Caesar that which belongs to Caesar” and you will not have any problems.

How We Can Help

These and other “hot topic” IRS issues are discussed in-depth at our Church Management and Tax Conferences across the USA. After attending one, the Pastor and Church Leaders will have clear direction on what they can and cannot do. Pastor, Church Leader, Do Not Think you can do Church books without the instruction you will receive at one of these conferences.

This is why it is vital for each Pastor and Church Leader to attend the conference nearest them, NOW! Your procrastination may be the downfall of your Church and Ministry. Contact us today to register by visiting www.cmtc.org or call us at 800-344-0076. You will be glad you did.

Remember, for others, this is a job, but for us “It is A Ministry!”
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By Dr. Michael Chitwood