Cash Gifts

(The following information is meant for general information only and not as specific legal or tax advice. Specific questions should be referred to your local tax advisor.)

• Contributions are deductible in the year in which they are delivered with the exception of contributions that are mailed by the donor. In those instances, the contribution is deductible in the year in which it was mailed rather than the year in which it was received.
  
  

• The church must acknowledge contributions in excess of $250 by means of a written receipt or itemized statement since the IRS will not allow donors to substantiate contribution in excess of $250 by means of a cancelled check. The statement should also include terminology similar to the following: "The donor received no goods or services in return for the contributions, and only intangible religious benefits were received."
  
  

• Charitable contributions are deductible only to the extent that they exceed the value of any tangible benefit received by the donor in return for the contribution.

Gifts of Property

The following information is meant for general information only and not as specific legal or tax advice. Specific questions should be referred to your local tax advisor.)

Types of Non-Cash Gifts:

• Real Property- includes land, buildings, fixtures, crops, and leases.
  
  
• ersonal Property- includes all other non-cash items and may be tangible or intangible.
  
  
  • Tangible Property- automobiles, collections, antiques, paintings, furniture.
    
  • Intangible Property- Stocks, bonds, promissory notes.
    

Rules concerning the receipt of non-cash gifts:

• Generally, the entire appreciated value of an asset can be declared as a non-taxable charitable gift. Also, no capital gains tax will be due when an individual gives an appreciated asset to charity.
  
  
• A donor giving real or personal property bears the responsibility for establishing the value of the asset for income tax purposes. The IRS requires donors giving real and personal property in excess of $5,000 to support their deductions with an expert appraisal of the asset. Please note, this does not apply in the case of stocks since the value can be readily determined.
  
  
• Donors of noncash gifts in excess of $5,000 must complete a form 8283 (Noncash Charitable Contributions) and attach it to their tax return. The church must fill out section IV of this return, but should insure that the description of the property and the date of the donation is accurate before signing the document.
  
  
• When the church acknowledges a gift of real or personal property, the church should not put a value on the asset. Instead, the church should fully describe the asset being given. The church would, however, assign a value to the asset for its own internal record keeping purposes. The value would be arrived at by determining the fair market value of the asset by using a comparable sales method or getting an experts opinion (appraisal).
  
  
• If the church sells within two years of receipt real or personal property that is valued at more than $5,000, a form 8282 (Donee Information Return) should be filled out by the church and submitted to the IRS. Rule of thumb- if the donor asked the church to complete section IV of a form 8283, then the church must fill out Form 8282 if the asset is sold within two years of receipt.

Personal Services

(The following information is meant for general information only and not as specific legal or tax advice. Specific questions should be referred to your local tax advisor.)

• The value of personal services is not deductible as a charitable contribution; however, the unreimbursed expenses incurred in performing the services are deductible.

The Return of Charitable Contributions:

(The following information is meant for general information only and not as specific legal or tax advice. Specific questions should be referred to your local tax advisor.)

On occasion, a donor may want the return of a charitable cash donation. The return of contributions for a prior tax year should not be treated simply as a public relations issue. There are legal issues involved as well.

Undesignated Contributions

Most church contributions are given as undesignated contributions. When a donor gives this type of contribution, it is an unconditional gift and there is an irrevocable transfer of the donor's entire interest in the donated funds. Problems in returning a donor's undesignated contribution would include the following:

• The donor would need to be informed that an amended federal and state tax return would have to be filed.
  
  
• Donors who receive refunds of contributions in excess of $600 would have to receive a Form 1099-MISC from the church.
  
  

Designated Contributions

Some individuals give designated contributions to the church whereby they stipulate how the contribution is to be used. It is important for church treasurers to understand that these types of contributions are held in trust for the explicit purpose for which the donation was given. As long as the church honors the wishes of the donor concerning the donation, the church is not legally bound to give the contribution back; however, should the church decide not to use the donation for the intended purpose, it must be returned to the donor.

Problems in returning a donor's designated contribution would include the following:

• The donor would need to be informed that an amended federal and state tax return would have to be filed
  .
• Donors who receive refunds of contributions in excess of $600 would have to receive a Form 1099-MISC from the church.
  

Designated Contributions

(The following information is meant for general information only and not as specific legal or tax advice. Specific questions should be referred to your local tax advisor.),BR>

On occasion, individuals may give funds that are designated for a specific purpose. For example, a gift may be received for the church's building fund or organ fund. On occasion, a church may receive a gift that is designated for a specific individual.

There are certain key points to keep in mind concerning the receipt of designated fund:

• All donations given to the church must bear the name of the church on the check. It must not bear the name of a particular individual.
  
  
• It must be understood by the donor that all donations given to the church are under the control of the church and that the church will try to honor all designations as a matter of accountability and integrity.
  
  
• In situations where the donor's designations cannot be honored, the church must either contact the donor and request that the donor redesignate the gift or the gift must be returned to the donor.
  
  
• If the donor's gift is given for the express benefit of a specific individual, it is not tax deductible. For example, if parents made a contribution to the church stipulating that a scholarship be given to their child, the gift would not be tax deductible; however, if the parents gave a contribution to the church and did not designate their son as the recipient, the donation would be tax deductible since the family is leaving the dispensation of those funds up to the church's Scholarship Committee.
  
  
• Contributions made to a church for a specific missionary are tax-deductible provided the church has full control of the donated funds.

Gifts of Stock

(The following information is meant for general information only and not as specific legal or tax advice. Specific questions should be referred to your local tax advisor.)

Publicly Traded Stock

• When a church receives a gift of publicly traded stock, it is easy to determine the value of the stock on any given business day.
  
  
• Since the value of the stock is easily determined, the donor does not have to fill out a form 8283 (Noncash Charitable Contributions) and the church does not have to fill out a form 8282 (Donee Information Return) when publicly traded stock is sold.
  

Non-Publicly Traded Stock

• Occasionally the church may receive a gift of non-publicly traded stock. Since it is difficult to determine the value of this type of stock, the church should give the donor a receipt stating the date of the gift, the donor's name, the number of shares given, and the name of the company.
  
  
• Donors who give gifts of non-publicly traded stock must fill out a form 8283 (Noncash Charitable Contributions).
  

Flexible Spending Account for Medical and Childcare Expenses

Flexible Spending Account

Definition

A flexible spending account (FSA) is a type of cafeteria plan authorized under Section 125 of the Internal Revenue Code. FSAs allow employees to purchase qualified benefits such as medical, dental, or child care expenses on a pre-tax basis.

Expenses Covered through a Flexible Spending Account

A flexible spending account may be used to pay for child care expenses and medical and dental expenses. Medical and dental expenses that may be paid through a FSA include co-payments, deductibles, and items not covered under the Board of Pensions plan. Individuals may use IRS Publication 502 Medical and Dental Expenses as a general guide for allowable healthcare deductions. Care should be taken since not all healthcare expenses listed in publication 502 are deductible through a FSA.

Advantages of a Flexible Spending Account Advantages to the Church:

A flexible spending account enables the church to set up a benefits program that will allow their employees (lay and ordained) to get more buying power from their healthcare and childcare dollars. Advantages to the Employee:

Employees can reduce their taxable income and use the income reduction to pay for expenses that otherwise would have been paid with after tax dollars.

(1)Federal and state rates are estimated and will vary according to an employees own tax situation.

Disadvantages of a Flexible Spending Account

Disadvantage to the Church:

The church has to administer the FSA and file an information return with the IRS.

Disadvantage to the Employee:

Since payroll deductions under a flexible spending account are pre-tax, no Social Security taxes will be paid on FSA accounts.

The flexible spending account is a `use it or lose it' plan. FSA dollars remaining unused at the end of the year are lost.

How to institute the program

How to Implement a Flexible Spending Account

• A plan document⁽¹⁾ detailing the flexible spending account must be on file with the employer.
  
  
• The employee must fill out an enrollment form⁽¹⁾ for the FSA.
  
  
• The employer must file an information return annually using Form 5500⁽²⁾.
  
  
  1. Sample plan documents are available at the presbytery office.
     
     
  2. Instructions for filling out Form 5500.
     
     

Sample plan document and other forms

Sample Plan documents and Other Forms

There are several forms the church will need for the proper administration of the Flexible Spending Account. Those forms include the following:

Plan Document
Employee Enrollment Form
Claim for Reimbursement of Medical Expenses
Claim for Reimbursement of Childcare Expenses

Samples of the above listed forms are available at the presbytery office. To obtain these forms please send an e-mail to cnoonan@nhpresbytery.org

Filing the information return with the IRS

Filing the Form 5500 information return with the IRS

Churches that have implemented a flexible spending account are required to file an information return (Form 5500 and Schedule F) with the IRS by July 31 of each year. Information on filling out the information return is available at the presbytery office. To obtain this information please send an e-mail to cnoonan@nhpresbytery.org.