Loss of Deduction for Moving Expenses
Prior to the passage of the Tax Cuts and Jobs Act of 2017 last December, a pastor's reasonable moving expenses could be deducted—with certain restrictions. Meals, for instance, could not be deducted. And the move had to meet both a distance test and a time test. The current law, however, no longer allows pastors and other employees to deduct moving expenses. Pastors now must pay their moving expenses "out-of-pocket" and "with no tax benefit," said tax attorney Ted Batson. If a church pays for moving expenses, he added, it must be considered taxable income.
—Church Law & Tax Report,adapted
Free Trip for Pastor … Be Careful
Many churches have presented their minister with an all-expense paid trip to the Holy Land for the minister and the minister's spouse.Such trips often are provided to commemorate some special occasion, such as a birthday or anniversary. In many cases the value of such a trip is treated as a nontaxable gift to the minister. Is this correct? Unfortunately, the answer is no if either or both of the following statements are true:
- The trip is provided to honor the minister for faithful service on behalf of the church.
- The trip is provided to enhance or enrich the minister's ministry. Such a trip is not a business expense under current law. The tax code provides that "no deduction shall be allowed … for expenses for travel as a form of education." IRC 274(m)(2).
As a result, the church's payment of the cost of such a trip is treated as the payment of personal vacation expenses, and the full amount must be included as taxable income on the minister's Form W-2 (or 1099-MISC if self-employed). This includes any trip expenses that are paid by the church.
—Church &Clergy Tax Guide, adapted
Are Your Financial Systems Susceptible to Fraud?
The following are indications that your financial systems are at risk:
- One person counts and/or collects church offerings.
- There is not regular turnover or rotation in those persons who count church offerings..
- Offering counts are submitted to the person who deposits the offering.
- No one regularly reconciles bank deposit slips with offering counts, or the person who does so is the same person who deposits the offerings.
- Only one signature is needed to write a check.
- Members who contribute cash do not use envelopes.
- Accurate contribution receipts are not issued to members, or they are issued but members are not encouraged to report discrepancies to the church board.
- Offerings are not deposited immediately.
- Monthly bank statements are not reviewed, or they are reviewed by the same person who deposits the offerings.
- Offerings fluctuate significantly.
The key point: The more that tasks and responsibilities are shared and divided, the more effective the system of internal control will be.
—adapted from Essential Guide to Money for Church Boards(available on CLTStore.com)
This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations."
Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.
If you found this article helpful, subscribe to ChurchLawAndTax.com for access to more articles like this one.