Q&A: Compensating Musicians Legally

Can we create a designated account to supplement an employee’s pay?

Vonna Laue, CPA
Bio

Due to the difficult financial times we are in, we have had to scale back, or drop completely, many items in our budget. In the past, our accompanists have been paid per service, but we are no longer able to provide as much as in previous years. Is it legal to set up a ‘Designated Account’ for this? Is this a tax deductible donation?

The church can raise funds for the music ministry and those would be tax deductible. However, the accompanists should still have a set compensation for their services. It is unlikely they would fall into a similar category as support raising missionaries so you couldn’t just pay them whatever they raise in contributions. If the funding doesn’t come in, you would need to support the payments through the general fund or discontinue paying for the service. If individuals wanted to give money specifically for an accompanist, the funds would not be tax deductible. To learn more about compensation planning, see ChurchSalary, and for comprehensive information on designated funds, see Richard Hammar’s Church & Clergy Tax Guide.

Vonna Laue has worked with ministries and churches for more than 20 years. Vonna was a partner with a national CPA firm serving not-for-profit entities through audit, review, tax, and advisory services. Most recently, she held the role of executive vice president for a Christian ministry that works to enhance trust in the church and ministry community.

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.

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