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Church Business Preparations for Year’s End 

Like other corporate entities, churches encounter business activities that must be completed just before, or soon after, the end of the calendar year. Now is the time to make plans for these various tasks. The questions that follow can be used as a checklist for church leaders.

Have clergy housing allowances been properly designated for the new calendar year?

Remember, clergy housing allowances must be properly designated and approved by the church board in advance. The best practice is to approve next year’s housing allowances in the current calendar year.

Have preparations been made for compensation and other payroll changes in the new year?

If compensation increase (raises) are being given, have they been properly approved? Will the changes be implemented in the payroll system in time for the first pay period of the new year?

Also, if any employees need to make changes to their payroll withholdings for the upcoming year, have they done so by completing a new Form W-4?

Have arrangements been made to include year-end bonuses and other fringe benefits on each employee’s Form W-2?

With very few exceptions, any cash or other kinds of gifts given by the church to its employees as Christmas bonuses need to be accounted for as taxable income on each employee’s Form W-2. This detail is easy to miss since these bonuses are often given so close to the end of the tax year.

Are we prepared to issue Form 1099s for our contractors?

Has the church kept careful track of who it has paid as independent contractors throughout the year? Has a completed Form W-9 been collected from each contractor? Is there a system in place to issue a timely Form 1099 to every contractor who must receive one? A tax professional can help ensure that all contractors receive the proper documentation each year.

Has the church advised its donors about deadlines for tax-deductible gifts to count in the current calendar year?

In order to avoid frustration later, it is a good practice for a church to remind its donors as to when donations are due in order to be included on the donor statement for the current year. Churches must report donations in the year in which they are “received.” For any mailed donations, the key determinant is the date (specifically, the year) in which the mailing is postmarked, not the date on the check. Similarly, any donations dropped off at the church office must be received in the current calendar year to be included on the donation statement. The date on the check is not outcome-determinative. Further, online or text donations should be made before year’s end to be included on that year’s donor statement.

Has the church budget been finalized for the upcoming year?

If the new year’s budget must be approved by a board or by congregational vote, has this been completed before the end of the current year to authorize expenditures in time?

Contact Clergy Financial Resources to help you with the next steps.

Clergy Financial Resources
Tax I Payroll I Bookkeeping I HR
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: 1 (888) 421.0101
Fax: 1 (888) 876.5101

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (763) 425-8778 
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com

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