Taxable Liability for Love Offering/Severance Package

by David B
(Houston, TX)

Our church has unfortunately been forced to sell our property and we are in the process of dissolution.

Because our minister is in his early 70's, he is not inclined to seek future employment.

We were blessed with a significant capital return from the sale and have chosen to reward our minister for his 25 years of service.

Our research to date regarding the tax liability of any sort of remuneration has been confusing at best.

We are in search of answers as to some method or financial instrument in which to eliminate or at least minimize the tax liability of a gift of $100,000+.

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Jun 30, 2021
Tax Consequences of Excessive Compensation
by: Vickey

I strongly advise you to hire a qualified nonprofit attorney with experience with nonprofit organizations... BEFORE you reward your minister with that LARGE gift!!!

Not only could they advise on the best way to structure such a gift to minimize taxes... but they could tell you if that amount is even possible without your Pastor and possible the board members that approve such a gift getting hit with a HUGE penalty for "excessive compensation" =(

You MUST ensure that gift will not cause all of them, including the pastor... to pay up to 225 percent of the amount that is considered compensation over a reasonable amount in penalties under Section 4858 (Intermediate Sanctions).

See more on excessive compensation on this page: https://www.freechurchaccounting.com/excessive-benefits.html

I can highly recommend Frank Sommerville with Weycer, Kaplan, Pulaski & Zuber law firm. I have attended multiple conferences and listened to his lectures. HE is an expert in church compensation issues.

Expect to pay quite a bit for his or any other qualified attorney fees, but it would be worth every penny!

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If you want to DIY your payroll, I highly recommend you look at using Gusto! It is very user friendly and their support is awesome! Plus they know how to set up and maintain payrolls for churches and nonprofit organizations.

Note: I am a "partner" of Gusto, but as I have told you before ... I never recommend anything that we or our clients have not tried and love =)



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