Guidelines for Benevolence Funds

by Carolyn

Benevolence Payments Taxable?

Benevolence Payments Taxable?

A fund was started for a sick child and
the contributions had her name on them.
What are the guidelines for distribution of the
funds received?

The father of the child works for the church.
Would any funds given to him become income?
(given to cover rent etc. for the family during
this time of illness.)

Vickey's reply

The donations would not be tax deductible to the donors.

Most of the time benevolence payments are not taxable to the recipient; however it gets a little sticky when the recipient is a staff member.

Careful documentation is required to ensure that the employee would have received a benevolence payment, and in the same amount, if the individual had not been a staff member.

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Comments for Guidelines for Benevolence Funds

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Oct 27, 2011
by: Tony

Also the IRS states that donations earmark for individuals cannot be deducted.

Nov 16, 2011
Keep Good Records
by: CTM

While I am not an attorney, I have dealt with these situations and had to seek counsel. In the first case there are a couple variables that must be considered.

This is my understanding of how to handle this situation. For the gift to be deductible to the donor, the governing body of the church (board, elders,etc.) must verify the need and sanction the support as a mission of the church.

There should be a resolution adopted at a called meeting and it should be reflected in the minutes of the meeting.

This will allow donors to give to the church and direct the gift toward this cause.

While acts of benevolence are not generally taxable to the receiver, careful documentation is required.

It seems to be to the best interest of all involved if payment is made directly to the hospital or organization providing the service.

In situations where the recipient is an employee of the church, it can get sticky. Any compensation received that can be interpreted by the IRS as compensation for services delivered is considered taxable.

Therefore, you must document that the assistance is NOT in any way attached to his/her services to the church. IMPORTANT: if others have not received similar assistance for a need, or the amount given cannot be verified as a legitimate need, the IRS has the authority to disallow this as a benevolent act and deem the assistance as payment and therefore taxable.

Bottom line: document, document, document! If in doubt, seek competent counsel. God looks at the heart, the IRS looks at the paperwork.

PS. this author is not entering into giving legal advice.

Nov 17, 2011
Document Everything
by: Vickey

Very good post!

I love how you worded this:
Bottom line: document, document, document! If in doubt, seek competent counsel. God looks at the heart, the IRS looks at the paperwork.

That sums it all up in a nutshell!

Thank you!

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