A Simple Guide to Giving Love Offerings

Written by Tracey Perez on Apr 23, 2019 in IRS Compliance

Pastors give so much of their time, effort, and heart to their ministries. It isn’t uncommon for their congregations to be stirred to generously bless them with a gift for all they sow into the church.

Easter is one of the most common times that churches like to honor their leaders. It’s a time for us to remember the sacrifice that the Lord made for each of us. As a reflection of Christ’s love, our pastors deserve to be honored as well. That is why Easter Sunday is one of the most common times a pastor will receive a love offering.

If you are a pastor and received a love offering this past Easter Sunday, you may be wondering what you should do with this generous gift you received.

Below, I will go over the steps you will need to take after collecting a love offering. Before we get into that, let’s look at what the IRS says about love offerings.

Are love offerings taxable?

Most people believe that a love offering is a gift given to an individual. However, although it is a gift of appreciation, the IRS considers love offerings as another form of taxable income.

Internal Revenue Code (IRC) 61(a) defines taxable income as “all income from whatever source derived, including compensation for services.” While the members of the church and the pastor receiving it view this amount as a gift, the IRS will view the same love offering as taxable income because of what section 102 says shortly after excluding “gifts” from taxable income.

IRC section 102(c)(1) says that "any amount transferred by or for an employer to, or for the benefit of, an employee" shall be treated as gross taxable income.

This means you still have to report any love offerings as compensation for the pastor. If the pastor or church does not report the love offering as taxable income in the year it is given, then there may be penalties. For example, the IRS may choose to audit the church if the church does not report the love offering on the pastor’s W2. The IRS may also charge a penalty tax to the pastor if the pastor fails to report the love offering as taxable income.

Now that we have a better understanding of why it’s important to report love offerings, let me share with you the steps to properly collect and report a love offering for a pastor.

Five steps to collect a love offering

1. Collect the offering.

If you receive one offering for both your general tithes and offering and an offering for the pastor, you will want to make sure you're able to clearly separate them. You are still responsible for making sure the church will be able to cover its expenses before issuing the pastor the offering.

2. Evaluate whether or not the church can pay this love offering.

Is the church operating at a profit? Or is it operating at a loss? You will want to make sure the church can cover its general expenses before the church pays the pastor the love offering. Your financial reports can also help with determining the amount of the love offering if it has not been previously approved in the church’s budget. Financial reports will give your church a breakdown of income and expenses and will provide the information to determine whether or not your church can give the love offering.

3. Check your budget.

Have you set up your budget to account for love offerings? If you haven't, that’s okay. You can still use your financial reports to calculate an amount for the love offering. A budget reflecting expenses like a love offering is important. It not only helps you to determine an amount that your board considers reasonable but also enables you to make sure the church is staying within the predicted expenses. This blog outlines the importance of your church implementing a budget.

If you don’t currently have a method of tracking your financial transactions, you need one. This is not optional for any organization. You are responsible for making sure that the church has financial transparency. Our StartCHURCH Bookkeeping Service assists with providing financial reports to help you. Not only that, but we will help guide you to make sure you have the information needed to make the best financial decisions for the church.

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4. Make sure the board approves the love offering being paid to the pastor.

One thing to note is that the pastor (as well as any individual related to the pastor) receiving the love offering cannot be part of the vote. Allowing them to vote on this decision is a conflict of interest. By using the StartRIGHT Service, you can get the help you need to create procedures for voting on financial and governing decisions that best fit your church. Your bylaws will outline the type of approval required to approve the love offering while still making sure you are in compliance with IRS laws. If you want to know more about the StartRIGHT service, call us at 877-494-4655.

As you hold the board meeting, make sure you have your board meeting minutes to back up the approval of the love offering. Board meeting minutes are proof of financial and governing decisions your board makes. If you’re having trouble understanding how to create minutes for your board meeting, our Secretary’s Suite can help your ministry with organizing and creating detailed board meeting minutes.

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5. After approving the amount, be sure to report it to the payroll company the pastor uses.

This payroll company will give you the steps on how to correctly give your pastor the love offering. If your pastor does not use a payroll company and receives checks, you can write him or her a separate check. Make sure the memo line says, “love offering.” This will help with tracking expenses in the future, if needed, and will help when you create the church budget for the following year.

Acknowledging our leaders

In celebrating Resurrection Day, we acknowledge that the Lord has given us shepherds to help guide us through this life. One way to honor them is to bless them with an offering showing our gratitude for the work they do for the Kingdom.

Following the steps I mentioned above will help you bless your leader correctly. If you have any questions, please feel free to call us at 877-494-4655.

Please feel free to comment. We always appreciate good dialogue. However, we do moderate each comment to ensure that it is on topic and not derogatory to other participants. We ask that you keep your comments brief and pertinent to the topic so that others may benefit.

Raul Rivera

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