It’s that time of year! The time when organizations start to think about the NEXT year! And this is a good thing because as we all know, December can get crazy with all the Christmas pageants, music programs and plays, dinners, work parties, etc. There’s just SO much to be done!
Just as there are lots of activities to choose from, there are also many Year-end Lists that are sent out from various organizations. Of course, I have to add mine to the mix. 😊 However, I am going to limit mine to the top 5 tasks that I think are the most important to be done before year-end.
So, let’s get to it!
#1 Review the Ministers compensation package
If I’ve said it once, I’ll say it again and will keep on saying it. You NEED to review your minister’s compensation packages. Are there any adjustments that you need to make to the designated housing allowance? Are there benefits you can offer to lower the taxable income to them? There is SO much a church can do to lower the ministers tax liability without costing the church any extra funds.
#2 Have all Employees review their W-4 for any needed changes
For your qualified ministers, this may include having them institute voluntary Federal withholding to help with their self-employment taxes.
For non-ministerial employees, a review if helpful if:
* the number of family members has changed during the year or if they anticipate a large increase/decrease in income for the foreseeable future they would also want to adjust their withholding.
* if they are ending up with a large tax liability each year, they definitely need to speak with their tax professional if they have one and make the necessary adjustments.
* if they are getting large refunds each year, then they are giving the government their money to use during the year and may want to reconsider and keep that money in their own pocket.
#3 Make sure you have any necessary W-9’s
This should actually be addressed BEFORE any Independent contractors receive payment, but sometimes it doesn’t get done that way. It’s much easier to get the form filled out before they receive their money then it is trying to chase them down to get the information after the money is already in their pocket.
There will be some who will say that they don’t need to fill out a W-9. According to the IRS Form W-9:
Purpose of Form
An individual or entity (Form W-9 requester) who is required to file an information return with the IRS must obtain your correct taxpayer identification number (TIN) which may be your social security number (SSN), individual taxpayer identification number (ITIN), adoption taxpayer identification number (ATIN), or employer identification number (EIN), to report on an information return the amount paid to you, or other amount reportable on an information return.
This means that if an organization or business pays an individual or business money, then they are required to collect a correctly filled-out W-9. A business would be any small business such as a plumber, electrician, bookkeeper, etc. You would not need to get one for utility companies, supply stores, etc.
The information return referred to could be either the 1099-MISC, or the 1099-NEC. The requirement for filing these forms is payment received in the amount of $600 or more. In some cases, you will know that you will NOT pay the individual more than $600 in a calendar year, so you may decide not to require the W-9 before payment. However, it is a good business practice to be in the habit of ALWAYS asking for the W-9 regardless of the individual or business. To make it a little easier, here is a direct link to download the current Form W-9 from the IRS website.
#4 Tell your members about year-end contribution rules
The month of December can bring a big surge in contributions for those wanting the tax deduction. It can also be a time of frustration when the contributions are not submitted properly. Here are some guidelines/deadlines to keep in mind:
Check donation: these have a couple of different situations – (1) checks turned into the church directly MUST be received by the church on or before 12.31.22 regardless of when the church actually deposits the check (2) checks mailed to the church MUST be postmarked on or before 12.31.22 regardless of when the church receives the mail and deposits the check.
Example: Joan writes a check dated 12.31.22 (Saturday night) and takes it to church on 1.1.2023 (Sunday morning) and puts it in the offering plate – that check is considered a 2023 contribution and NOT a 2022 because it was physically received by the church on 1.1.2023. Now, if that same check was mailed and postmarked 12.31.22, even though the church doesn’t receive the check until Tuesday’s mail which is 1.3.2023, it still counts as a 2022 contribution due to the postmarking.
Cash donation: same rules apply as for checks
Credit Card donation: these MUST be made by Midnight on 12.31.22 in order to count for 2022 contribution deductibility.
ACH/Online Giving platform donation: same rules apply as for Credit card donations
#5 Review your annual budget
If you haven’t already done so, review your budget for next year. Start by running an Actual vs. Budget report for the current year to see how you did and what adjustments, if any, need to be made. Remember that budgets can always be adjusted at any time but starting the year off with a clear goal and path in mind can help make the transition to a new year smoother.
Though there are more tasks that can be done, I believe that if you do at least these 5 things by year end, you’ll be in a good position to begin the new year and ready to tackle the lovely January tasks such as getting those W-2’s, 1099’s, and Contribution statements in the mail by January 31st.
Until next time..... Keep representing Him well!
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