Does your church have a coffee shop? Many churches have found that coffee shops are a great way to increase fellowship at their churches. Often times, PSK is asked about the tax and accounting issues that come along with coffee shops. These are great questions! Nonprofit organizations can be taxed on dollars that are earned from activities that are not related to their tax-exempt purpose. So, is selling coffee supportive of the church's tax-exempt status?
The IRS has some specific rules regarding coffee shops run by churches. If the shop is run by volunteers and the purpose of the shop is to provide a format for church members to congregate and have religious discussions, then the shop supports the exempt purpose of the church and income would not be taxable. If the church's coffee shop is attempting to compete with Starbucks, then there could be some tax ramifications. Whether or not that income is taxable, it is a good idea to code all coffee shop activity separate general ledger accounts, one account for income and another account for expenses.
Contact PSK if you have specific questions about your church's coffee shop!
At our most recent monthly breakfast for church business administrators, Lawrence Swicegood offered great info on Crisis Management. He runs Clarion Call Marketing. Very insightful! Everything from how to be prepared even before a crisis erupts, how to handle and how to do a "post mortem." Topics, in outline form:
- Everyone is Affected by a Crisis
- Characteristics of a Crisis
- Planning for a Crisis
- Potential Crises for a Church
- Developing a Response Plan
- Internal & External Communications
- Post Crisis Analysis
For more info, contact Lawrence (lswicegood@msn.com) or give us a call at PSK.
Last week, we had a presentation here at PSK on this topic! Homeland Security and the Patriot Act are musts when thinking about your church's Mission Trips.
Steve Tiemann was our speaker. He is an attorney who has lots of experience both as a lawyer and as a church member in this area.
Main points –
- Know the guidelines. The US Treasury has issued Anti-Terrorist Financing Guidelines. Boring but an essential 16 page document to be aware of.
- Know who you’re dealing with. In the foreign country, have intimate knowledge about the organizations and/or individuals you’re sending money to. You can check out the Terrorist Exclusion List (TEL) at the US Dept of State's website – www.state.gov.
- Know that the US Gov't is serious. Federal law doesn’t allow you to use the excuse: I didn’t know!; If your church or organization inadvertently supports terrorists or terrorist organizations, you’re guilty!
As part of your year-end payroll processing tasks, you might have a question or two about reporting minister's earnings and allowances on Form W-2. Maybe, you just need a refresher. Here are the general topics that we receive questions about.
Salary – Salary paid to minister is reported in Box 1.
Federal Withholding – May or may not be zero. Ministers are exempt from withholding requirements but may elect to have withholding. Enter the amount withheld.
Social Security, Social Security Withheld, Medicare, and Medicare Withheld – Ministers are considered self-employed for purposes of Social Security and Medicare taxes so these boxes are blank.
Housing & Utility Allowances – Should be reported in Box 14. Remember that housing and utility allowances should be officially designated by the church in advance.
All other boxes on the W-2 are generally the same for ministers and non-minister employees.
The IRS has an example of a Minister's Form W-2 in its Publication for Clergy and Religious Workers. See it at …
http://www.irs.gov/pub/irs-pdf/p517.pdf
Also, there is a good IRS Publication for Churches and Religious Organizations that cover a variety of tax issues. Check it out at …
http://www.irs.gov/pub/irs-pdf/p1828.pdf
Our clients keep us on our toes! Because we encourage them to call us when they have a problem and we generally don’t charge for phone calls, we get a steady stream of questions posed to us by our clients and friends.
Most of the questions are quite routine, dealing with things common to all churches: whether or not a particular employee qualifies for a housing allowance or if a designated gift should be treated as a deductible contribution. But occasionally something new comes along.
PSK hosts a monthly breakfast for church business administrators where in addition to a delicious meal the attendees are treated to a discussion of a topic relevant to church business administration. In May our breakfast was billed, “Know Before You Go” and we discussed things that must be considered when planning a short term mission trip. For example what do you do if a member asks for contribution credit for paying for a specific individual to go on the trip? We also covered trip organization (passports, visas, shots etc.), paymaster responsibility and record keeping and insurance.
But, something I was asked recently made me aware we had left something out. “We are sending money to a mission group in Africa. Can we get in trouble with Homeland Security?” Turns out they and other churches funding ministries like schools, hospitals and orphanages, should be concerned.
Now, I don’t want you to get overly concerned. The reality is that it is unlikely that a church will have its assets frozen or exempt status threatened by funding an orphanage. Provided, of course, it takes minimum precautions. Here’s just a few:
- First become familiar with Executive Order 13224 and The USA Patriot Act the legislation requiring that certain things be done. Helpful resources are The US Treasury’s Anti-terrorist guidelines and The Principles of International Charity.
- Educate your church, both staff and laity, of the implications of the anti-terrorist rules.
- Do background checks on the groups you are helping, particularly referring to several government lists that identify terrorists.
- Keep good records of all of your activities and insist on accountability.
There you go; something new to worry about over your Christmas holidays. If you have any questions, don’t hesitate to call!
Merry Christmas!
It is getting to be that time of year to prepare for your year-end payroll processing. Have you ever been a lucky recipient of a letter from the Social Security Administration stating that you have reported incorrect names or social security numbers on your W-2's? Do you have a process in place to ensure you don't receive this letter?
Here is a link to a list of good business practices to ensuring your are issuing correct W-2's. http://www.ssa.gov/employer/critical.htm.
Stay tuned… my next blog post is on reporting minister wages.
