BP 11122023 129pm - Flipbook - Page 77
Hardship Payments, Taxability, & Funding Guidelines
HARDSHIP PAYMENTS PROVIDED TO PARISHIONERS
Parishes and missions that want to assist needy parishioners or others who are dealing with
financial hardship due to various circumstances, such as loss of a job, family illness, medical
bills, or other causes should establish a plan to balance the natural pastoral instincts of
compassion with the parameters that the IRS calls for with our not-for-profit status. The IRS
distinguishes between charity and private benefit. (See Publication 4221-PC (Rev. 3-2018)
(irs.gov) for more information) A private benefit, such as a lack of true financial need or a
conflict of interest that involves a church representative and recipient of assistance, can trigger
tax consequences on the recipient and jeopardize the non-profit status of the parish and mission.
The following guidance has been provided to assist with making decisions about such support
and provides a process to follow that allows the ministry to be compassionate without
jeopardizing the IRS rules in this area.
GENERAL GUIDANCE
The best way to handle requests for financial assistance is to develop, perhaps with a key
member of the parish finance council or the parish treasurer, a policy within the IRS guidelines
that can be followed consistently. Such a policy may state limits, such as $500, that might be
provided in the most difficult cases, with suggestions for approaching other organizations that
might be approached for financial needs greater than that, such as the St Vincent de Paul Society
and Catholic Charities, or other charities that are better equipped to formally evaluate and assist.
IRS RULES ON COMPENSATION, GIFTS, AND CHARITABLE GIVING
The guidance that the IRS provides in this area is that payments made to individuals fall into 3
major areas:
COMPENSATION 3 payments made in exchange for goods or services provided by the
individual are taxable income, and must be coded as either W-2 wages or as 1099 income.
PRIVATE GIFTS FROM PRIVATE INDIVIDUALS 3 payments made by one taxpayer to
another taxpayer are subject to a limitation ($16,000 in 2022). This means that anyone can give
tax-free gifts to any other individual without the gift being taxable to the recipient or a tax
deduction to the donor. A parish and mission cannot make a private gift. The use of parish staff
or the office is discouraged, though helping accumulate private gifts within the parish is possible
if care is taken to ensure that the gifts remain as private, from individual to individual, and does
not lead to any recognition by the parish as to tax-deductibility. A caution in using the parish
business office in this manner is that it may often lead to many other needy families requesting
similar treatment, which makes decisions on hardship cases very difficult to make. A
documented policy on hardship assistance is recommended.
We discourage the parish from organizing and sponsoring a fundraiser, such as a GoFundMe, for
a specific individual in the parish’s name. The pastor may promote a fundraiser that is organized
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