Processing Love Offerings

by Gerald
(Raleigh, NC)

We've had a question arise concerning love offerings. I understand the basic rationale for the offering being non-deductible for the giver, but also not being taxable compensation to the recipient, but my question is this:

If an individual writes a check payable to the church, but designated as a love offering to the pastor (or other person), the church does not consider it a charitable contribution and merely processes the check through the church's bank account and then writes a single check for the love gift. On your website you made the following comment:

"Another example of this is when the church takes up a love offering for the pastor. If the love offering is given directly to the pastor and is not processed through the church's contribution records, then the contributors are not going to be able to deduct their donation. The love offering is a non-taxable personal gift to the pastor by the church members."

So, I am wondering what it actually means to have a love offering "processed through the church's contribution records?"

If the church merely acts as a conduit, has no control over the gift since it is designated to a specific individual, does not treat the gift as a charitable donation (and communicates this to the giver), would the gift still be considered as being "processed through the church's contribution records?"

Of course, the church could just require love offerings to be only in cash or checks payable directly to the recipient, but the church prefers to not have the recipient know the names and amounts of specific givers. So, we're trying to find a way to keep the love offering details private, but still have it treated as a non-taxable gift vs. taxable compensation.

Thanks for any advice.

Comments for Processing Love Offerings

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Love Offering to Pastor
by: Anonymous

Hi,
I’m new to church accounting. I understand that a love offering is not tax-deductible for the contributor and is taxable as income to the pastor. My question is how do I give the money to my pastor? The contribution was made thought the church website with a credit card and noted for my pastor for Christmas. So, I would have to run it through the church accounting. Do I just write him a check for the full amount? He gets paid on a W2 so do I run it through payroll and note it as bonus pay? Or does he just report it when he files his taxes? I’m confused. Thank you for any advice.

Pastor and one other control of Benevolent Fund
by: Anonymous

Hi,
We have a Deacon Committee comprises of 4 deacons and a Pastor. Over the last five years, we have been getting donations from an estate totaling $30,000.00. Pastor and one Deacons are signers of the bank account. They do not share or discuss who they helped over the last five years. It's bank account is not recorded in the church books. Totally blind by the Church Council.
I recently became the Treasurer of the church and asked Pastor to reveal balance, and to hand $$ over to the church and be recorded in church. I asked for documentation to support the disbursements. He is reluctant and said he would give receipts but no name of the recipients. Is this alright?

Large sums collected during Anniversary
by: chairman

Clarification on anniversary offering for the pastor. I would guess it totals between 800 to 1100 dollars. He stands in front and members give him the money in a basket. No one counts the money before he takes control. I've always been told all money collected in church should be counted and a check issued to the pastor. Please clarify.

evangelist tax return
by: paul

For an evangelist who has received love offerings all year for his travels to different churches, are all of the amounts his has received from churches taxable?

Love Offering Taxable
by: Vickey

In regards to this comment:

"Should a member of the church who performs work say in our computer department but was not asked to take on that particular job receive a love offering from the church and not be given a 1099 tax reporting form?"

Yes... you can give them a love offering...but...

No...since it was for "performing work" the IRS would most definitely consider this taxable income.

If it was over $600...you must send them a 1099 and even if it was less ...you need to have that individual complete and sign a W-9 and keep it on file at the church.

Also inform them that the IRS would consider it taxable income ...regardless of the amount.

No Benevolence for Family Memebers
by: Vickey

Board members, employees, and their direct family members cannot receive benevolence from your church.

The reason they are ineligible to receive any financial benefits from your church is spelled out in Treasury Regulation 53.4958-39(b). The IRS considers them disqualified persons due to their position of substantial influence in your tax-exempt organization.

Click on Topics -> Contributions -> Benevolence Fund or copy and paste this in your browser:

https://www.freechurchaccounting.com/benevolence-fund.html

Ask your sweet member to give her love offering directly to the Pastor's wife...because you cannot issue a contribution receipt for donations to individuals.

Click on Topics -> Contributions -> Contributions to an Individual or copy and paste this in your browser:

https://www.freechurchaccounting.com/contributions-to-an-individual.html

Pastor's wife gift
by: Anonymous

If a member wants to donate a love offering to a pastor's wife, who is not employed by the church, how can they do that and still receive a tax deduction? Do they send it through a benevolence fund?

Love Offerings To Church Members Performing work as a none employee
by: Anonymous

Should a member of the church who performs work say in our computer department but was not asked to take on that particular job receive a love offering from the church and not be given a 1099 tax reporting form?

Run it Through the Church
by: Vickey

You are correct, Cyndi. The offering should be deposited into the church's account. The church can write the group a check. That check can be any amount the church deems to be proper.

Offerings for Musical Groups
by: Cyndi

Am I correct in my understanding that it is inappropriate to take up an offering for a gospel group, and to give them that money while they are still there? If a W-9 is on file for the group, and they come in on a Friday night for a free-will offering concert, is a church obligated to give them the offering that night? Doesn't it need to go through the church office, be deposited, and a check written to them? - thus showing on a 1099 at year-end? Thank you in advance for any help.

Gifts to Missionaries
by: Gerald

1. If it was a personal gift from an individual member to a missionary (not done through the church as a tax-deductible donation), then it is not taxable income to the missionary.

2. If it was a tax-deductible gift to the church and the church then gives it to the missionary, I believe it would be taxable to the missionary and would therefore require a 1099 form to be issued by the church.

3. However, if it was donated "for the work of" the missionary, then it might be different. Our church has many "for the work of" donations, where the money is used by the missionary on items that help their mission (e.g. supplies, car expenses, etc.) and we consider these not to be taxable to the missionary. They are similar to an expense reimbursement.

Missionary Blessing Gifts
by: Rick

This is a great site!
I have done a lot of research and cannot find a definitive answer to gifts to missionaries - there is a lot on Pastoral gifts but not on missionaries... their connection to a church is different - does that make handling their gifts different? If you give a true discretionary gift to a missionary of $1000 from church funds (where charitable contribution credit applies), does it require a 1099?

Love offerings to unpaid pastor
by: Lisa

Our pastor is bi-vocational and does not take any salary from the church. We just received a monetary gift through the church offering for pastor appreciation. I understand the rules about whether it is a tax-deductible gift for the giver. My question is about the tax rules for our pastor since he is not on payroll. Do I only need to report it if yearly total exceeds $600 (as a 1099)? Or is there some other way I need to handle this? Thank you for your time and assistance.

PASTORAL SUPPORT
by: Anonymous

Thanks Gerald,

So basically, a special pastoral offering is collected once a month. these monies are placed into a separate ledger account that is only for his use for rest and relaxation. he has a church credit card and will charge expenses to the card. once he returns, he will then charge those expenses against that account. often times, his wife, who is the executive pastor, will also use the monies.

Pastoral Support
by: Gerald

Yes, if you are collecting regular donations, even if they are referred to as "love offerings," they certainly sound like taxable income to me and should be in the pastor's W-2.

When you say it is used at the discretion of the pastor, I assume you mean used for his own benefit, in which case, again it is taxable income. On the other hand, if this is a discretionary church fund (like a benevolent fund) that the pastor is using for other people's benefit, then it wouldn't be taxable income to him.

PASTORAL SUPPORT
by: Anonymous

Hi, I have a question and I apologize if it is repetitive. If the church collects lover offerings on a regular monthly basis for "pastoral support" and their is no written policy for what these monies are to be used for, but solely used at the discretion of the pastor, should those monies be taxable and reported on the Pastor's W2?

Pastor's Anniversary Question
by: Anonymous

I want to know if your church has a policy that you count all monies that's taken up in the church; Pastors Anniversary etc. should Pastor's comply? Is it tax deductible for the individual that makes the check out to the church for the Pastor? Church name on the check but Pastor's name on the envelope.

Help
by: Anonymous

I have read the IRS pubs and everything on this site. Am I correct in thinking it is better to NOT send love offerings through the church accounting? Then the dilemma of is it a charitable contribution or not, do we need to report the donation or not, all go away and the burden is on the person receiving the love offering. Does the church need to know how much was donated? What is the CORRECT WAY to handle love offerings?

pastor love offerings
by: Anonymous

when you collect a love offering in front of the church, should you give it to the pastor right then and there? or should you bring the love offering in the church office, count it and then give it to the pastor? What are the proper procedures for handling a love offering for a pastor?

Dinner & Massage
by: Gerald

A dinner and massage - a nice gift !

My understanding:

If a church collects a love offering AND a committee of the church has control of the offering and makes its own decision of how to allocate the offering among the pastor, asst. pastor, others, etc. - THEN the gift itself would be tax-deductible, as the giver does not control who is ultimately receiving the gift.

However, this would be taxable income to the recipient (the pastor). It does not matter that the pastor receives a non-cash (dinner/massage) benefit vs. a cash payment.

is pastor appreciation gift deductible
by: Anonymous

I understand that if a gift is given with a persons name attached to it, it is not deductible. Does the same hold true if money is collected through the church and a committee of the church is going to purchase a hotel stay with dinner and massage?

W9
by: Anonymous

Hello I read the last comment on May 12th regarding the guest musician and was wondering when the W9 comes into play and for what it is needed.

love offering to visiting musician
by: Anonymous

If a visiting musician or band comes for a love offering, is that love offering taxable income to the band/musician? My position regarding the love offering is that all of it should go through the church and one check written by the church to the group. I know others who have the opinion that a love offering is a gift, even to a visiting music group who leads the worship and if people give directly to them, not through the church, the group would be able to consider it a gift and not income Can you help me with this issue?

Designated Love Offering
by: Vickey

Debra,
You are correct and I second what Gerald posted :)

The relative's offering would not be tax-deductible for the very reason you and Gerald posted and it would be taxable income to the pastor.

The solution Gerald posted is in my humble opinion the best solution for all those involved.

Thank you, Gerald!

Pastor Love Offering from Relative
by: Gerald

1. Not tax-deductible, since it was designated to go to an individual (the pastor) and the church has no control over how the money is disbursed.

2. Taxable W-2 income to the pastor

...the worst combination..

it would be better to return the check to the relative and tell them to just make a personal gift to the pastor, and not run it through the church's accounting. It would still not be tax-deductible, but would not result in W-2 income for the pastor

Pastor Love offering from Relative
by: Debra

New to Treasury position...
A relative of the pastor (not a member of the church) mails a check to the church, designated in memo line with the pastor's name.

It appears that this has been handled incorrectly in the past. I think that this has been recorded as tax-deductible and run through a missions account so it is not recorded on the pastor's W-2 as taxable income.

Am I correct in the following:
- This is NOT tax-deductible to the relative since it is designated in the memo to an individual (no church options for dispersing the funds).
- Is this still taxable income to the pastor since it is not a church member giving a love offering for "services rendered"? If it is taxable income, I presume it is to be included in the church's W-2 form to the pastor.

Love Offerings in Box1 on W2's
by: Anonymous

Can you tell me what IRS Publication states that Love offerings, Ministers' anniversary, birthday offerings should be included in Box 1 on the W2 with the minister's salary amount?

Taxable Income
by: vickey

All "taxable income" should be reported in box 1 on a W-2.

Love Offerings
by: Anonymous

In which box on the W2 do you put the amount for the love offerings given for birthday's and anniversay and Christmas?

My thoughts
by: Anonymous

Here's what I'm thinking: From everything I have read, the bottom line is that the IRS doesn't really give a rip as to why you give a gift to the pastor. In their opinion, because he is a pastor and therefore that is his employment any money given to him is payment for services rendered. No exceptions. (Okay, there is one exception that his family can give him gifts.) But as silly and ridiculous as it is, it is what it is. So people get around this with a loophole. They give money directly to the pastor (no checks, just cash) and the church isn't involved at all. Therefore, the pastor doesn't have to report it as income, because who will ever know, right? It's like if I am self-employed and get paid in cash and don't report it, then who will ever know, right? So, for me, it boils down to a matter of integrity. Can you go through this loophole to avoid paying the tax even though you know what the IRS deems as income? I guess so. People do it all the time. But does that make it right?

Love offering vs compensation
by: Gerald

A true "love" offering is not deductible by the giver (because it was given directly to the pastor) and is also not taxable to the pastor (because it is a "love" offering and is not compensation income. However, when a church routinely makes "love" gifts (such as on an anniversary) and therefore many people are giving at the same time, and when this is a sizeable amount of money and no doubt a signicant percentage of the pastor's annual income - then, to the IRS, it starts to smell like compensation and not a true "love" offering.

love offerings
by: Ms Hall

I would like to know the following.
l. Baptist churches often celebrate the pastors anniversay with each member giving a monetary gift, either cash in his had directly or money (cash or check) placed in an envelope. My question is can the church allow this, and not report how much money the pastor actually received, because its often hundreds to several thousand dollars. Some churches don't require the pastor to report how much money he received because they don't think he should pay any taxes on the money.
2. Should love offerings to pastors on thier anniversary be reported to the IRS?

Re: Love Offering Sensitivity
by: Vickey

Thank you! Your thoughtful comment means a lot to me.

Regarding your question...I think that depends on individual church policies. That I know of...there is no law that says you have to notify the donor of a gift’s deductibility.

However, I (like you) always have some that make the check payable to the church for an individual’s love offering. I personally let them know that their gifts...even though written to the church...are not tax deductible and will not be included on their annual contribution statement. But we are a small church and it's easy for me to notify them personally. If we were a bigger church and I didn't know everyone personally, I may handle it differently.

Anyone else want to chime in on this very interesting question? How do you handle this issue in your church?.

Love Offerings Sensitivity
by: Anonymous

This is the most comprehensive website I have every seen concerning church financial matters. It is such a blessing! To anyone out there, our church promotes different holidays to give a love offering to our pastor. The checks are written to the pastor and not passed through the church. Because this type of giving does not meet the test for tax deductible contributions or non-income to the pastor we consider these contributions non-deductible for the giver and taxable for the pastor. However I always have some who put the church name on the check and because of this I run it through the church, should I notify these individuals that there love offering is not deductible?

Contributions to an Individual
by: Vickey

No. If you put an individual's name on the check or envelope, it is not tax deductible...even if given through the church.

See this page on contributions to an individual.

Love offerings are usually taxable income for pastors no matter how they are taken up. The IRS takes the stand that love offerings from church members to Pastors are motivated by their services as a minister of the gospel thereby making it not a gift but taxable compensation.

Love Offerings
by: Shelia

I understand you to say, if I give the pastor a love offering in his hand and in his name(via check), it is not tax deductable for me and it is not income for the Pastor right?

But if I give the offering to the church or write the Pastors name on the check or envelope it is tax deductible for me and income for the Pastor right?

Yet another Love Gift dilema
by: Anonymous

If a member of a church decides to email the congregation regarding the collection of a love gift for a Pastor that is leaving, and the monies are to be given directly to the pastor, not to the church does that protect the churches position and the pastor's from an IRS standpoint ?

Vickey's reply
I read an article the other day about a pastor in NC that went to prison for not reporting love offerings. He and his wife got into trouble with federal prosecutors for taking home such collections without counting them or reporting them as income to the IRS.

I would advise your pastor to seek a knowledgeable tax professional's opinion on the taxable issue of such a love offering.

Taxability of Love Offerings
by: Anonymous

I believe a love offering could also generate taxable income to the pastor, BUT not be a tax-deductible expense for the giver. When a gift is designated to one individual (the pastor), I don't believe it is deductible. In our church we have end-of-year love offerings, but have several pastors. The Deacons of the church actually decide how to allocate this lover offering among the pastors - and I think that is key to the tax-deductibility. I'm not sure you could accomplish this is there is only one pastor.

Vickey's reply

I agree. When a check for a love offering is written to the church and processed through the church and the church has "control" where it will go, it possibly could be considered a charitable contribution, but not if the check is made out to an individual such as the pastor.

love offering
by: Lisa

So if the pastor solicits a love offering at the end of service, I understand that it is taxable income for him, but is it tax deductible for the contributor. If so, how? I understand church contributions being tax deductible but am a little confused on how love offerings to ministers can be. If it is, that will be great!
Thanks!

Vickey's reply

Your first few words "solicits a love offering" determined the gift would be taxable to the pastor. Also, any offering taken up for a specific individual is nondeductible to the donor.

Love Offerings and Taxes
by: Vickey

What I meant when I said is "not processed through the church's contribution records" is that the donation "gift" is not recorded on that individual's contribution record and would not be included on their annual contribution statement.

However, it can be processed through the church's financial records and in fact must be if there are checks made out to the church and a church check is issued.

You are absolutely right about donations "earmarked" for individuals. They do NOT qualify as tax deductible contributions.

These nondeductible gifts are also called "conduit" or "pass-through" transactions.

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