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25 Jan 2018

What My Church Did Every January and February

Raul Rivera

As churches begin settling into the the new year, many pastors, church planters, and ministry leaders are asking, “What tasks do I need to take care of for my church early in the year?”

I remember asking myself a very similar question when I was a young pastor in Florida. The unfortunate thing was that I did not really have anyone to turn to who could help answer this question or provide guidance. It was just my wife and me, trusting God and figuring things out one day at a time. 

I learned a lot of lessons in my more than 10 years of pastoring that I have been able to share with pastors and ministry leaders across the country over the past 18 years. 

In the blog, I want to share with you seven things my church did every January and February that I believe will benefit many of you today.

7 things every church should do at the beginning of each year

1. Distribute contribution statements

By the end of January, most taxpayers have received their Form W-2, 1098, 1099-MISC, or other tax-related documents. In order for a taxpayer to deduct a church donation, he/she must receive a contribution statement before filing a tax return.

It is usually a good idea to make an announcement that you will issue contribution statements to your church members by January 31st. Ideally, members should wait on filing their tax returns until they have received their statements.

(Recommended reading: “Everything You Need to Know About Donation Receipts”)

2. Update Form W-4s

If your church has staff members on payroll and you forgot to have them update their Form W-4s before the end of the last year, then you should go ahead and have all employees review and update their Form W-4 now.

Form W-4 is the form each employee must fill out before beginning employment at the church. Its purpose is to determine how much federal withholdings will be taken out of each paycheck. 

Employers must obtain this document at the point of hire and use it to withhold income for federal tax purposes.

There are, however, special income tax withholding rules that pertain to pastors.

In short, pastors are exempt from income tax withholding unless there is a voluntary withhilding agreement between the pastor and the church.

This does not mean that pastors don't have to pay income taxes, but rather, pastors are responsible for withholding their own taxes and paying them in quarterly installments.

I know this may be a lot to digest, so if you have additional questions, give us a call at 877-494-4655.

3. Prepare Form W-2s

Each year churches pay their ministers, musicians, nursery workers, and other ministers for their services. 

Make sure that you have the exact names, addresses, and Social Security numbers of each employee, and get ready to finalize the year-end totals for their Form W-2.

You will want to make sure you distribute Form W-2 to church employees no later than January 31st. If you need assistance with your church’s Form W-2s, give us a call at 877-494-4655.

Get the Help You Need with W2s and Taxes Today!

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4. Hold your annual board meeting

Each church must have at least one board meeting annually in order to comply with the minimum state and federal requirements. The annual board meeting should cover a variety of topics. 

Below is a list of some of the more important topics to help you with the agenda of your board meeting.

  • Election/appointment of directors/officers.
  • Official removal of directors/officers.
  • Ratification of prior acts: It is important to ratify prior acts that may not have been properly ratified in the past. This could include items such as opening a bank account, adopting bylaws and policies, or approval of salaries. As a general rule of thumb, anything that deals with church governance or finances, and is not covered in previous minutes, needs to be ratified retroactively. You should also retroactively approve items that were approved by an unbalanced board of directors.
  • Approval of compensation for pastors and staff (this should be done at least once every year).
  • Designation of housing allowances.
  • Review, update, and adopt essential policies.  
  • Financial status report.

(Recommended reading: “Oh no! We have no minutes!”)

5. Properly add and/or remove board members

During the past year, you may have had board members either resign or just quit participating in board meetings. Now is a good time to document their exits from the board by recording it in the minutes of the annual board meeting.

Additionally, many churches list their board members in the state’s annual reports so that they show up online. 

Very few churches, however, properly add the new members to the board by recording those acts in the minutes of a board meeting.

Adding the new members to the board through a board vote and recording the vote in board meeting minutes is equally as important as adding them to the state’s annual report.

(Recommended reading: “When Does a Board Member’s Resignation Become Effective?”)

6. Improve your chart of accounts

In any accounting system you choose, establishing the chart of accounts is essential to the success of the system and your ministry. 

Each church has different needs for its chart of accounts based on the number of checking accounts it has.

Every financial decision and new project your church starts, including stewardship campaigns, affects the chart of accounts and determines the number of new accounts you will need to create within it.

Our Bookkeeping Service for churches and ministries helps to ensure your chart of accounts is always in order. For more information, call us at 877-494-4655.

7. Re-approve all compensation agreements

The beginning of each year is the perfect time to review, restructure, and re-approve any compensation agreements. This includes housing allowances for ministers.

Perhaps this is the first year your church will be compensating you or another staff member. If so, it is important to know whether or not the individual is a ministerial employee or a regular employee. Additionally, each individual’s compensation must be approved prior to him/her receiving it. 

Most often this will be done as a compensation package that is approved by the board of directors. If you need assistance or have questions about compensation packages, please call our office at 877-494-4655 or click on the link below.

Create a Minister’s Compensation Agreement Today!

Click Here

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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.

Blessings,
Raul Rivera

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About the Author

Church Planter. Speaker. Author. CEO. Raul Rivera has had ample experience in the church planting world. His current venture, StartCHURCH, has helped 1000's of churches to start right. Raul has compiled an array of manuals and software tools that help churches stay compliant with the IRS. He also hosts over 35 national conferences per year, training pastors on how to launch their churches. Raul is married to his wife Genel, and they and their five children live in Atlanta, GA.