Podcast – “Let’s Talk Church Finances” w/ Delano Sherley – Woodlawn Talks – Episode 64
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Year-End Contribution Rules
Here is a memo you can share with your donors that explains the year-end rules and deadlines regarding contributions.
To ensure the deductibility of your church contributions, do not file your 2022 income tax return until you have received a written acknowledgment of your contributions from the church. Under IRS rules, you may lose the deduction if you file your tax return before receiving the written acknowledgment from the church.
(Canceled checks are no longer considered by the IRS as proof of a contribution.)
For a contribution to be included on your 2022 contribution statement, the contribution must be delivered to the church (or postmarked) on or before December 31, 2022. No exceptions! Contributions received after this date – regardless of the date of the check – will be recorded on your 2023 contribution statement.
Also, the IRS permits taxpayers to deduct either the actual transportation costs incurred in performing charitable work, or a standard mileage rate of 14 cents per mile.
Are You Protected?
Despite the interruptions to business as usual over the last eighteen months, it is still critical that churches maintain policies and procedures that assure a proper level of control over church assets, especially cash. Proper controls protect both the church from theft and the staff and volunteers from any false allegations of wrongdoing. It is not a matter of IF someone would violate the church’s trust and embezzle funds but COULD they do so as the result of weak internal controls. Here are some basic guidelines:
- Lock all collections in a fire-proof safe until two or three unrelated people can count the money together
- Collections should not be taken off site to be counted
- All cash (both loose and in envelopes) should be recorded on a “Receipts Record” and each counter should sign the form to indicate that they agree to the amount counted.
- The deposit should be taken to the bank as soon as possible.
- Verify that the deposit and the “receipts records” match, thus verifying that all monies counted equals the amount of the weekly deposit.
For a check list of these and other internal control issues, please email us.
Year-End Contribution Reports
This is a good time to review the rules for issuing year-end charitable contribution statements.
Charitable contributions must be reported and claimed in the year in which they are delivered to the charity. If you receive cash or a check after December 31st, it should not be included on the donor’s 2018 contribution statement. This is true even if the check is dated in December, but delivered in January.
For the purpose of determining the delivery date, a contribution that is mailed (postmarked) by December 31st, 2018 is considered delivered by that date and can be included on the donor’s 2018 contribution statement. However, if you receive a check in 2018 that is dated in January 2019, it must be held until 2019 and recorded as a 2019 contribution.
Not following these rules can jeopardize the tax exempt status of the church.
Each contribution statement should include the following statement: “No goods or services were provided in exchange for these contribution, except for intangible religious benefits.”
We suggest that you advise your donors to not file their 2018 income tax return until they have received a written acknowledgment of their contributions from the church. Under IRS rules, they may lose the deduction if they file their tax return before receiving the written acknowledgment from the church.
Electronic Giving
You have likely read the statistics: only 10-25% of church members actually tithe and the average Christian only gives 2.5%. I recently read that if all Christians increased their minimum giving to 10%, the church would collect an additional $165 billion/year. One thing that churches can do to increase giving is to adopt newer technology (on-line giving, kiosks, phone apps, etc). There is a correlation between the use of this newer technology and church giving, since the number of members who carry cash or a checkbook is declining. Churches that embrace the change make it easier for this generation to give. The ability to create recurring giving also helps to reduce the “summer giving slump”, as funds are transferred automatically each week, regardless if a member is on vacation, out of town, etc. Any electronic giving should include mobile technology.
However, 85% of mobile givers will give up if the process takes more than 30 seconds – so make sure whatever system you adopt, it is easy to use.
Finally, don’t forget the back-end – make sure however people give, the church staff doesn’t have to re-enter the same data into a contribution software, it should update automatically. Giving is still more of a heart issue than a money issue. Churches who are intentional on teaching on the subject one or two times each year also see better giving trends.