During the NACBA conference I briefly attended a session facilitated by Glenn Woods and Bill Gruenewald that discussed issues relating to Mega-Churches. One of the key issues for churches of all sizes is record retention.
Part of developing a strong internal control structure is defining what and how long certain information will be retained and maintained. Best practices for boards and management includes discussing and adopting a record retention policy. It is important to determine where the information will be filed, (electronically, on-site or off-site) security of the information and condition for maintenance (heat and dampness may be destructive to certain files).
Information such as tax returns and governmental reports affecting a ministry's taxes should be maintained permanently. However, most backup records, such as receipts documenting income deductions should only be kept for seven years. The IRS calls for a six-year statue of limiations for tax receipts. The IRS has 3 years from the date the return is filed to question or audit the return.If the IRS can prove an omission of at least 25% of income, the time period doubles to six years. Therefore, the seven-year period gives a one-year cushion beyond the IRS limit. While most churches are not required to file tax returns, ministries and ministers are required to file selected forms. These rules apply to any entity or individual that must file. So be prepared and retain certain information.
What kind of information should be retained and for how long? See our next post.
Comments (2)
Steve you have raised an interesting question regarding the parsonage that the Ministry would receive from a minister. Several points to consider:
1. Is there any debt associated with the personal residence that is transferred to Ministry? The debt may or may not be assumed by the Ministry depending on the financing agreement.
2. The property becomes a ministry asset that creditors could file a lien against.
3. Any equity in the property transferred may be lost by the minister. The equity may be part of the minister's retirement assets.
The housing allowance would definitely be affected to include only the parsonage related expenses. The annual fair rental value of the parsonage is not taxable for federal income tax purposes, but is taxable for social security purposes, if the minister is non-exempt. The parsonage allowance should be designated in writing prior to payment.
I would encourage you to expand the ministry board to include other qualified individuals that support the goals and exempt purpose of the ministry.
Posted by Becky DaVee | September 25, 2007 11:17 AM
Posted on September 25, 2007 11:17
What are your thoughts on a minister transferring his personal residence to his ministry? The Board of the ministry is the minister and his wife.
What issues are there other than a decrease in the housing allowance?
Posted by Steve Butler | September 20, 2007 8:23 PM
Posted on September 20, 2007 20:23