Why a compensation contract is important
Understanding the importance of a compensation contract can sometimes be difficult. Most churches and ministries create pastoral compensation plans based only on the cash they can pay the minister, and taxes are not taken into consideration. Church boards are unaware that there is a proper way to structure compensation. Learn how to ensure that your pastor or minister qualifies for maximum benefits. With these benefits, the pastor can keep more of the money he or she earns and can plan for a stable retirement, too.
Take advantage of the special rules for ministers
There are more than 12 different ways to customize a minister's compensation package to take advantage of the special tax, insurance, and retirement benefits that are available. Additionally, if your church runs a school, teachers can qualify for the same tax benefits as the minister. Every possible scenario, from the housing allowance to a tax-free retirement plan, is calculated to create the best possible package for each individual.
How much should we pay our pastor and employees?
The IRS Compensation Initiative, which is designed to audit minister compensation packages, makes deciding how much to pay your pastor and employees difficult and dependent on many factors. One should factor the church's budget, the pastor's/employee's job description, number of hours dedicated to the job, how the job propels the church's or ministry's purpose, and other relevant factors when determining reasonable compensation. We have discovered that churches are unaware of how to properly structure compensation packages in order to receive full tax benefits. These benefits also reach into retirement to provide for your golden years. Furthermore, we can help you include past years of uncompensated work into the compensation package.
What about section 4958 requirements?
Under section 4958, the IRS has been given the ability to assess intermediate sanctions on churches that do not have appropriate compensation documentation. Many people believe that section 4958 was created to ensure that compensation packages not be too excessive. This is not the case. This provision was created to ensure that compensation packages be properly documented and reported to the IRS for tax purposes. Under this code, even the smallest gap in documentation will result in stiff intermediate sanctions of up to 200 percent under Treasury Regulation 53.4958-4(c)(1). The severity of these sanctions needs to be respected, as many ministers and churches will go under the IRS microscope in the near future.
Do you ever wonder if the church can pay for the pastor's cell phone, car, or gas? Do you ever wonder how to properly allot for love offerings? Do you know whether or not a provision can be added to the pastor's compensation contract to take care of his or her spouse? Can you enter into a voluntary withholding agreement or even a retirement plan? Let us help you turn these questions into answers.
You supply the information and we fill in
Under your direction, we prepare the compensation package that you can use whenever you like, and as often as you like. The compensation package also includes minutes and resolutions needed to properly implement the package. Because churches are required to keep an accurate set of minutes, it is necessary to make sure that the minutes clearly indicate which board members voted on the compensation package and which did not, along with documentation noting that the salary recipient recused himself/herself from voting on the compensation package.
Below are some very important clauses that you can use
Church rights and responsibilities
Agreement duration and renewal and termination
Cost of living adjustments
Cell phone use agreement
Pastoral professional development clause
Spouse protection clause
Accountable reimbursement agreement
Section 280(c)(1)(a) home office deduction clause
Minutes approving compensation
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