CPA's & Consultants Providing Business Insight To Churches & Ministries

Cell Phones…Can you hear me now???? (post 1 of 2)

With the advancements with technology, cell phones, pagers and other “listed property” are being used by churches and ministry personnel. These costs are typically paid by the ministry…however…(can you hear me now???) certain calls received/made by the employee are personal. How should the ministry record the cost of these personal calls?

You Can’t Make ME! (Oh yes, the church can!)

According to the Non-Profit Legal and Tax Letter, August 28, 2006 edition, Mr. Hugh Webster notes that Non-Compete Agreements are enforceable against former employees of a non-profit.

Religious Discrimination - HUGE Victory

In a recent post from the Church Report, a Texas church received a huge victory in the lawsuit against a county assessor's office. The problem...after the church facility burned, the church was unable to rebuild quick enough before the tax man assessed property taxes and penalities. HUGE tax bill. The churched hired an attorney and the church ultimately won. No taxes were paid.

A HUGE Victory - church burned out!

Church property is primarily exempt from property taxes, under the IRS code. However...in a recent case reported in a Church Report article dated August 21, 2006,

Texas Church Wins Tussle With Tax-Man, Gets Exempt Status Restored

The REAL difference...Little Debit #1

The distinguishing characteristic between for-profit and not-for-profit corporations is not whether each seeks to operate efficiently, generate revenue, and produce earnings, but rather what each entity does with such earnings. Earnings of not-for-profit corporations are used to support the charitable purpose of the corporation or are reinvested into the company to ensure future operations. In contrast, earnings of for-profit corporations are distributed to owners or shareholders.

Another Form…Another revision...Why are we surprised?

In accordance with the new IRS requirements, as published by the August 28, 2006 issue of Non-Profit Legal & Tax Letter…

After December 1, 2006, a 501(c)(3) organization applying for tax-exempt status must file a new Form 1023 (revision date June 2006). It is currently available on the IRS website .

The only change is Part XI, User Fee Information. It reflects the new user fees ($750 for organizations with annual gross receipts of greater than $10,000, $300 for less than $10,000) that became effective July 1, 2006.

Kickin.. back

How does a Church monitor payments made to various suppliers? How do they know that the purchasing agent or payables clerk isn’t receiving kickbacks? An easy internal control feature for protecting employees and the resources of the Church are:
1.Periodically, confirm selected information with vendors including how much they have paid for selected products or services.

2.Review contracts between consultants and vendors.

3.Send documentation of Church policy to vendors, preventing any additional funds or commissions that will be paid to consultants, external to the contract.

HOW CAN IT HAPPEN?

In an article released from Agape Press, Joseph DeRusso, former consultant to the Roman Catholic Archdiocese of New York, has pleaded guilty to fraud, tax and obstruction of justice charges related to a $2 million kickback and embezzlement scheme.
HOW does this Happen? How does a consultant divert $1.2 million in kickbacks related to purchases for the Roman Catholic Archdiocese? Simple…or perhaps not so simple. Fraud occurs in various ways, usually, when the perpetratore has a 1. perceived pressure, 2. the opportunity to commit the fraud or 3. rationalization (they owe me!).

Benevolence for Employees

A church has an employee who would typically qualify for assistance under the benevolence program; either medical or financial hardship. Is this allowable? Is this taxable compensation to the employee? IRS Publication 3833 provides the following guidance:

IRS will presume that payments made by the church to an employee (or family members) for disaster relief and emergency hardship are consistent with the Church’s charitable purpose if: 1. the class of beneficiares is large or indefinite
2. recipients are selected by an objective determination of need

Ministry Wardrobe – Logos?? Business deduction by pastor? (3 of 3)

A pastor purchases selected shirts and pays to have the ministry logo embroidered on the shirts. He wears the ministry shirt in the performance of his duties and the cost is not reimbursed by the church? Is this a legitimate business expense deductible on his tax return?