For our friends residing in Massachusetts there are some new important payroll requirements starting July 1st, 2019. Massachusetts has become the 6th state in the US to implement a Paid Family and Medical Leave (PFML) Insurance.
Many churches in America struggle to abide by the rigid compensation regulations as they seek to bless their employees. They wrestle with the question of how to continue to care for those who serve their congregations with limited financial resources.
We all know the idiom “Don’t put all your eggs in one basket.” The premise is that if a farmer were to collect all his eggs into one basket and then drop the basket, all would be lost and he would have to start again. The expression is often used to warn someone from pinning all their hopes, efforts and treasures onto one thing and risk losing everything.
Last month, the Seventh Circuit of the U.S. Court of Appeals unanimously reversed the lower U.S. District Court case’s ruling from October 6, 2017 that the housing allowance for ministers was unconstitutional.
Every year church boards look for a way to exercise their fiduciary responsibility and consider auditing the books. Underneath it all, the board desires to have an independent financial professional “take a look” at the books and report if things are OK – and maybe offer some suggestions on how things could be done better.
This decision to utilize interns can often be complicated by requirements from both the IRS and the Department of Labor (DOL). If churches are not careful, the decisions associated with interns could cause strenuous situations involving taxes and fees for both the intern and the church.
Many churches, in an effort of blessing their pastors, present ministers with all-expense paid trips to the Holy Land. With the goal of blessing their pastors, churches often use these trips to commemorate special occasions and do not take into consideration the IRS’s view on such gifts.
Pastors around America were shocked in 2018 when they realized that their churches may have to pay the Unrelated Business Income Tax (UBIT) to IRS because of parking for their employees. As illogical as this is, the 2018 TCJA law declared that the expense of providing free parking (and/or transit passes) for employees is deemed to be an item of Unrelated Business Income (UBI) to charities.
Initiating the practice of budgeting sets a plan around how God is calling His church to use the funds He will provide. Intentional forethought from church leadership in crafting a budget guides the church financially throughout the year, increasing stewardship of the funds God has entrusted to your church, increasing accountability for church leadership, and fostering confidence in the management of funds given by congregants.
Churches frequently fall prey to thinking that there is no need to budget because “next year is going to be a lot like this year”. When I hear those remarks from churches, I think of the truth in Yogi’s observation, and wonder if heaven weeps at a missed opportunity to hear what the Lord has planned for that ministry. Is that church headed to where He wants it to go – or to “someplace else”?
During 2017 we became increasingly aware that a startling percentage of church payrolls are incorrectly prepared. These are usually payrolls where the church innocently relies upon one of the major payroll companies, like ADP or Paychex, to do things correctly and “keep the church out of trouble”.
Churches seeking to truly bless their pastor(s) should remember that checks and gift cards given on Pastor Appreciation Sunday are taxable income to the recipient. To truly bless its pastor, the church can (and should) “gross-up” the payment for taxes two ways.
Many churches are inadvertently costing their pastors thousands of dollars in taxes every year because of poorly structured compensation packages. This is particularly true of small churches with bi-vocational pastors.