Giving Traps…
Dec01

Giving Traps…

GIVING TRAPS… To give or not to give? … that is never the question! As Christ-followers, as Disciples of the Word, as the Church Body (…tax exempt non-profit charitable organization…) –we are commanded to GIVE –help the poor and needy, the sick and the wounded. “He who despises his neighbor sins [against God, his fellowman, and himself], but happy (blessed and fortunate) is he who is kind and merciful to the poor.” Proverbs 14:21 (Amp.) But the church also must abide by governmental tax rules designed to prevent abuse… and to protect its tax-exempt status. Wisdom calls us to be aware of some of the “traps” of benevolent giving… Qualifying the Needy –the recipient of benevolence must lack the resources to meet the need. Do we give without question, or do we have a stated policy that qualifies the need? Discretionary Accounts –many churches maintain a minister’s discretionary fund for benevolence. If the minister does not account for this fund or is the sole signer on the account, then all amounts placed in the account are taxable income to the minister. Repeat Requests –the IRS grows concerned when the benevolence assistance is regular and continuous to the same recipient. This can be construed as unreported income, or receipt of private benefit, and could potentially jeopardize the church’s tax-exempt status. Employee Assistance –The IRC requires all benevolence payments provided to employees be taxed, reported on W-2 and (if non-clergy) payroll taxes withheld. This would include any emergency assistance, such as medical or household expenses. One exception… IRC Sec. 139 allows employers to provide tax free assistance to employees who suffer losses as a result of a qualified disaster. Gifts Designated to an Individual –problems arise when contributions are specifically designated for a named individual. Did the donor intend to make a contribution to the church, or did the donor only intend to benefit the designated individual using the church as an intermediary in order to obtain a tax deduction for an otherwise nondeductible gift? How do we avoid the traps? First and foremost –be proactive! Do not wait until confronted with a request for assistance to determine how to handle the situation. Have a stated, written and approved policy in place. Some conditions to be considered… Was the offering preauthorized by the church board [or governing body]? Are the recipients financially needy and is the need substantial? Are immediate family members of the recipient the primary contributors? Are multiple and consistent benevolent gifts distributed to the same individual? IRS has issued a ruling that can also give certain guidelines… “Section 501(c)(3) organizations …are not precluded from making distributions of their funds to...

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