Properly Reporting Year-End Contributions

How to handle January contributions backdated to the prior year.

Church Finance Today

Properly Reporting Year-End Contributions

How to handle January contributions backdated to the prior year.

In many churches December is the month in which the most contributions are received. This is easily explained—many donors make large contributions in December to fulfill pledges or other commitments made during the year. But, with the hectic holiday season, many of these donors end the year without honoring their financial commitments to their church. In some cases, they attempt to do so by depositing a check in the offering during the first worship service in January which they “backdate” to the prior year.

Example. Bob made a personal commitment to give $5,000 to his church in 2001. By the end of the year, he had given only $4,000. While attending church on Sunday, January 6, 2002, Bob writes a check for $1,000 that he “backdates” to December 31, 2001. The church treasurer is not sure if the check should be included on Bob’s 2001 contribution summary.

Should the treasurer in this example treat Bob’s $1,000 check as a 2001 contribution? Many churches advise the congregation during worship services on the first Sunday in January that checks contributed on that day can be credited to the previous year if they are backdated to December 31st of that year. Is this correct? Or, should Bob’s check be treated as a year 2002 contribution? Can the church or donor assign the contribution to either year? Every church treasurer should be able to answer these questions. Doing so is easy, if you remember the following two rules.

Rule #1: the general rule. The income tax regulations specify that “ordinarily, a contribution is made at the time delivery is effected. The unconditional delivery or mailing of a check which subsequently clears in due course will constitute an effective contribution on the date of delivery or mailing.” According to this language, a check (payable to a church) dated December 31, 2001 but physically delivered in January of 2002 is deductible only on the donor’s 2002 federal tax return. This is so even though a donor backdates a check to read “December 31, 2001” during church services in January of 2002. It is even true if the donor actually wrote and dated the check on December 31, 2001 if he or she did not deliver the check until 2002.

Rule #2: the exception. The only exception to the general rule is a check that is dated and mailed (and postmarked) in 2001. The fact that the church does not receive or cash the check until January of 2002 does not prevent the donor from deducting it on his or her 2001 federal tax return.

These two rules are summarized in a table.

Crediting Year-End Contributions Type of contributionChurch reports as a 2001 contributionChurch reports as a 2002 contribution

checks written in December 2001 and deposited in church offering in January 2002  X
checks written and deposited in church offering in January 2002 but “backdated” to December 2001  X
checks written and deposited in church offering in December 2001 but “postdated” to January 2002  X
checks written in December 2001 and deposited in the mail and postmarked in December 2001, but not received by the church until January 2002 X  
checks written in December 2001 and deposited in the mail in December 2001 but not postmarked until January 2002, and not received by the church until January 2002   X

This content originally appeared in Church Treasurer Alert, December 2001.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

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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