Most Common Questions Pastors Ask, Part 2
By Angie Joya
Starting a ministry is an exciting time! However, sometimes all the excitement leads people to make decisions that feel right in the moment but are not always in compliance.
At StartCHURCH, it’s not uncommon for us to get the same questions from different pastors and ministry leaders throughout the country. For example, we often hear questions like,
- What should we do after we incorporate?
- When can I open a bank account for my church?
- How do we handle donations if we haven’t opened an account yet?
If you have been wondering about these questions yourself, or think you know the answers, I encourage you to keep reading!
If you’re not at this point yet and instead have questions about incorporating or the importance of bylaws, please consider checking out this blog.
“What do I do after getting incorporated?”
One of the most necessary steps in getting your organization up and running is often overlooked. Your next step is to hold a proper board meeting and to take board meeting minutes.
Think of board meeting minutes as a receipt. Without a receipt, you have little to no proof of purchase. And without board meeting minutes, you have little to no proof of the decisions being properly approved at your church. Board meeting minutes, therefore, must be taken at each board meeting and properly formatted.
In essence, board meeting minutes are documented discussions and decisions made by the board of directors. Those minutes must also be read by each board member and approved by a vote from the board. In short, when your church has a board meeting, it must be documented in minutes.
Here are a few tips on taking board meeting minutes:
- Create an agenda and properly format it with the call to order, reading of previous minutes, new business, old business, etc. The first board meeting makes sure you’re adopting all of the internal governing documents as the official documents of the church. There are certain items that will only pertain to the first board meeting (i.e., approving the bylaws, resolving to open a bank account, and approving the policies for the church).
- Send out the notice in advance of a board meeting to each board member. Be sure to give sufficient time for the notice as required by your state's law.
- Create an attendance list to keep track of the members present and absent at the meeting.
- Keep detailed notes of the discussions and decisions of the board using a format based on the agenda.
- Use the notes to create the actual minutes using the format we recommend in our Minutes Suite.
- Send a copy of the board meeting minutes to each board member for his or her review.
- At the next board meeting, ratify the copy of the minutes from the previous meeting.
Lead Your Board Meeting with Confidence!Click Here
“What about opening a bank account?”
In order to open a bank account, most banks require an organization to have articles of incorporation and a tax identification number (or FEIN). Because it’s important that any donations, such as tithes and offerings, be deposited to a bank account in the church’s name, opening a bank account is a huge milestone! Each bank has its own requirements, so it’s always a good idea to check with your desired bank for any additional requirements prior to opening an account for the church.
Because many people are so eager to get to this step, some may overlook the process of getting incorporated. They usually obtain a tax identification number (or FEIN) and open an account with only a tax identification number, under their name, potentially as a Doing Business As (DBA). In order to avoid a conflict of interest and to create a distinction between the church and personal transactions, it is imperative that the church incorporate and have an account for itself. Although opening an account is such an essential step, it’s also important to start maintaining records of donations as soon as possible, especially if you want to issue donation statements at the end of the year.
It is important to keep a few things in mind when issuing these statements:
- Distribute contribution statements on or before January 31.
By the end of January, most taxpayers have received their W-2, 1098, 1099-MISC, or other tax-related documents. For a taxpayer to claim their donations to their church, ministry, or nonprofit as a deduction, he or she must receive a contribution statement before filing a tax return.
It is usually a good idea to make an announcement that your contribution statements will be issued to church members and other donors by January 31. Ideally, members should wait to file their tax returns until they have received their giving statements.
If you’re looking for help with keeping track of your donations and issuing giving receipts, check out our Kingdom Steward software.
- The credit card rule
According to Publication 526, contributions contributions charged to a bank credit card are deductible in the year that the charge is made.
This means that if an individual makes a credit card donation on December 30, but the church does not actually run the card until January 1, the donor does not get to write it off until the next year. If this happens to you, adjust your records to ensure that the contribution statement is correct.
- The quid pro quo rule
This rule requires that your ministry keep track of donations to your church when the donor receives something in return. An example may be the recording of a Sunday sermon. A church sells a CD of the sermon for $10.00, and the donor gives the church $50.00. The quid pro quo rule allows the donor to get a tax-deductible donation of $40.00 because the giver received something in return for the donation.
- The $75.00 rule
Tax regulation requires a donor who gives a quid pro quo contribution exceeding $75.00 to receive a separate, written receipt that states how much was donated. The receipt should include a good faith estimate of the value of the goods or services the donor received in return.
For example, if a traveling minister wanted to sell books and other merchandise, and offered the opportunity to sign up to become a partner in the ministry. All someone had to do that day was to contribute $100.00 and make a pledge to give $100.00 per month, and in return, they would get newsletters, prayer cards, and special reports. And to top it off, they would also receive a gift basket worth over $50.00. Though the baskets had actually been donated to the ministry, when the ministry gave the baskets away to those who made the $100.00 contribution, under the quid pro quo rule the receipt could only state that $50.00 was tax-deductible because the basket the donor received in return was worth $50.00. Under the $75.00 rule, because more than $75.00 was originally donated (though only $50.00 counts as tax-deductible), the donor must receive a separate written receipt to get a tax write off. This should state the good faith estimate of $50.00 received back in goods and or services. A simple contribution statement will not do.
Track Donations with Kingdom Steward!Click Here
The questions are never ending
The truth is, you’ll never stop having questions. And because of this, our team at StartCHURCH will always have the answers. Ministry life is very difficult, and there will be some decisions that will be more difficult to make than others. But stay steadfast in the direction God has for you. With the right people surrounding you, you can continue to be confident in the direction you’re going. Let StartCHURCH be part of that team!
Give us a call at 877-494-4655 to learn more about the information given in today’s blog, and to find out how our team can serve you.
What questions do you have about your church or ministry? Let us know in the comments below or send us an email at email@example.com.