Year-End Tax-Related Responsibilities for the Financial Team
By Cynthia Gordon-Floyd, CPA, Contributing Writer
Whether your church operates on a calendar or fiscal year end, there are several tasks that should be completed at the end of each calendar year. These tasks ensure proper and timely Internal Revenue Service and Social Security Administration reporting, as well as your reporting responsibilities to your church membership.
Annual Giving Statements – Annual statements detailing the amount each member and guest have given to the church should be sent out to each person no later than January 31st of each year. It is a best practice to document all gifts from visitors of $25 or more each year; capturing their information from their check or online donation. If they give online, you can provide them with an online statement. Providing giving statements to visitors is a powerful outreach tool that can provide goodwill far into the future.
Many churches only provide giving statements to their members, but this falls short of the legal requirement. All churches are required to provide a written receipt to anyone who gives the church more than $250 in a calendar year. The receipt/giving statement should be detailed to provide the donor with a clear record of all donations made; not just a total dollar amount of gifts given. Statements should be itemized with each donation received throughout the year from that individual.
Payroll Filings – At the end of each quarter, the church should prepare form 941 to report all wages paid and the amount of FICA, federal, and state taxes that have been withheld from employees’ paychecks. If your pastor is the only paid staff for your church, you do not have to file form 941, because the pastor is considered a self-employed person, and the church is not required to withhold taxes for the pastor. Form 941 is required for all other church employees with federal and state tax withholdings.
W-2’s and 1099’s – All employees should receive form W-2 no later than January 31st of each year. All independent contractors should receive form 1099 no later than January 31st of each year. Pastors should only receive form W-2; no pastor should receive a form 1099. It is a disservice to provide a pastor with form 1099 as it forces the pastor to report their income at the highest tax bracket. It is important that each church prepare and report tax forms in a timely manner for proper financial responsibility of the church.
Cynthia Gordon-Floyd is a certified public accountant and founder of Willing Steward Ministries, LLC. Willing Steward Ministries (www.willingsteward.com) is a financial consulting and accounting firm for churches and other faith-based non-profits, specializing in Bible-focused financial practices, pastoral compensation issues, IRS compliance, and other financial needs specific to churches. Cynthia is a graduate of Lake Forest College and holds her MBA in Accounting from DePaul University. She is a Steward and the Financial Secretary at the First AME Church of Manassas in Manassas, Virginia.
