We have a pastor who has officially resigned and moved. Some of the congregation has pledged to donate money weekly through the end of 12/31/10 as part of his "severance package". This has been ok'd by the deacon board. My question is this: If we run this money through payroll "thus making it taxable income to the pastor", is the donations tax deductible to the donors?
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4Comments
Earmarked Gifts
VVickey
According to Dan Busby, CPA, in the book: Zondervan 2010 Church and Nonprofit Tax and Financial Guide
donations "earmarked" for individuals...do not qualify for a charitable deduction.
Earmarked, conduit or pass-through transactions like you were talking about are a big no-no with the IRS. If the donations were just given to the church as a regular offering without specifying it going to a certain individual, it would probably be deductible. However, with the name on the checks, I think it would be considered an earmarked gift.
donations "earmarked" for individuals...do not qualify for a charitable deduction.
Earmarked, conduit or pass-through transactions like you were talking about are a big no-no with the IRS. If the donations were just given to the church as a regular offering without specifying it going to a certain individual, it would probably be deductible. However, with the name on the checks, I think it would be considered an earmarked gift.
follow up
AAnonymous
So if the IRS gets their money via payroll taxes then the donor automatically gets a deduction? There wouldn't be any issues with the church being used as a conduit to benefit a specific individual? I've read opposing opinions. Would you have any IRS rulings I could look into?
designated offerings
AAnonymous
I guess my concern was that a specific individual is being designated on the checks and collected weekly and that is usually a no no by the IRS. It appears that we are using the church as a conduit to give money to an individual and get a tax deduction. That's why i didn't know if running it through payroll made a difference as to the deductibility of the donor. I've read opposing opinions on different web sites. does anyone have any IRS rulings that may support one way or the other?
Tax Deductions
MMarcus in Texas
Since the money is flowing through the church's books/bank account and since the recipient will be paying federal income tax on the money, I would think the contributions from church members would qualify as tax deductions. This appears to be a simple matter of the church leadership choosing to keep the former pastor on the payroll until the end of the current calendar year as severance pay.