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Churches everywhere are scrambling to send out tax-deductible contribution statements to their donors by January 31st. When issuing a receipt or contribution statement it is vital that you do it right. Let us share some rules for ensuring this is handled properly:
Rule #1: The Credit Card Rule:
Many churches now accept credit card donations. However, IRS Publication 526 states that contributions charged to a bank credit card are deductible in the year that the charge is made. That means that if an individual makes a credit card donation on December 30th, but the church does not actually run the card through until January 1st, the donor does not get to write it off until the next year. If your church had this happen, make sure you adjust your records to make sure the contribution statement is correct.
Rule #2: The Quid Pro Quo Rule:
This rule requires your ministry to keep track of donations made to your church when donor receives something in return. For example, the youth department sells a ticket to a Christmas Dinner for $15 and the donor gives the church $50.00. Quid pro quo rules allow the donor to get a tax-deductible donation of $35.00 because he/she received something in return for his/her donation.
Last Spring, I attended a revival at a church in Florida where the traveling evangelist had a product table in the lobby. He also had a special table where someone could sign up to become a partner in the ministry by agreeing to contribute $100.00 per month. In return he/she would get newsletters, prayer cards, and special reports. And to top it off, he/she would also get a beautiful gift basket, worth over $50.00. Though the baskets had actually been donated to the ministry, when the ministry gave the baskets away, under the quid pro quo rule, the receipt could only state that $50.00 was tax deductible because the basket the donor received in return was worth $50.00. A simple contribution statement will not do.
Rule # 3: The $250.00 Rule:
This rule requires that any donation of $250.00 or more made to your ministry be treated differently. In order for the donor to get a tax write off, he/she must get a separate written receipt stating how much was given and that, "no goods were provided except for intangible religious services."
We hope this helps. We are available to answer any questions you have about year end reporting, clergy tax or any other church accounting needs.
For more information, call us at (404)793-0303 or toll-free at (866)306-8003.
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