BP 11122023 129pm - Flipbook - Page 78
by a separate individual, but communication should be clear that it is not a parish fundraiser. See
Payment Processing Systems The parish should understand the IRS’s tax laws related to a
hardship payment to an individual, and that a payment organized by the parish could
unnecessarily trigger a 1099 if the fundraiser is in the parish’s name and there is not a
documented financial need. Additionally, the contributions to the fund are not tax deductible to
the donor when they are earmarked for a specific individual.
CHARITABLE PAYMENTS FROM PARISH FUNDS 3 funds that are provided out of general
contributions are generally recognized as taxable income if paid to an individual or family,
unless certain need based requirements are met. In the IRS’s view, charitable donations given to
the Church in offertory are allowed to be tax-deductible. However, in order for the payments to
assist an individual to not be taxable to that individual, certain qualifications must be met and
documented. For the need-based assistance to be considered charitable, the parish must follow
the following guideline:
1. The recipient of the fund cannot provide a service for the benefit of the parish or mission
in exchange for the assistance. Meeting this requirement will eliminate the need of
issuing a 1099 or similar tax form.
2. The following documentation should be retained in an organized manner for transparency
and record keeping purposes:
• Eligibility of the individual receiving the assistance.
• IRS record keeping requirements for assistance that is intended for charitable
purposes include:
1. Name and address of recipient
2. Amount distributed
3. Purpose of assistance given
4. Manner in which individual was selected
5. Relationship between the recipient and the organization. If the
assistance is provided to someone that has a relationship with the members
(including pastor, treasurer, finance council, employees, and ministry members),
officers or donors of the parish or missions it must be noted.
• Process for monitoring the use of the funds.
TYPES OF ASSISTANCE
NON-CASH ASSISTANCE: Parishes are encouraged to only provide non-cash assistance to
increase the assurance that the funds are used as intended. The accounts payables process must
be follow: pre-approval of purchase (threshold may be set), provide receipt for purchase,
document business purpose, (see Best Practices for details). Giving cash gifts directly to the
recipient should be avoided so that funds cannot be used for other purposes. Example of noncash assistance include:
1. Bills Paid Directly: make direct payments to the third party vendor, such as for utilities,
mortgage/rental, insurance, medical, food, transportation, funerals, school, etc.…on the
individual’s behalf. Obtaining a copy of the bill paid should be part of the formal
evaluation process of the family’s needs (See IRS record keeping requirements).
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