Q&A: Credit Card Fees for Donations

How does a church account for fees charged on donations?

We just began accepting credit card donations via a national processing service. We were told that the full amount of each contribution is tax deductible, even the portion that the service takes out for credit card processing fees.
Should we record the full contribution from the donor, and then record a “negative contribution” to account for the amount of the expense for each transaction so it reflects what actually comes into our bank accounts? Plus, how do we track this for auditing purposes?
The acknowledgment to the donor (receipt or giving statement) should reflect the full amount of the gift.
The merchant processing fee is a cost or expense to the church that is necessary for accepting such gifts. In reality, it is little different (other than the amount) from the charges many banks assess for processing deposits of checks.
The most appropriate accounting treatment for such costs is to recognize them as operating expenses of the church.
You can track them in a separate account for management and analysis purposes if that is helpful.
It would be rare to account for such costs as “negative contributions.” Of course, depending on the significance of the amounts involved, the accounting treatment you choose may not be material to your financial reporting, in which case you should choose the method (for internal financial reporting) that your leadership finds most helpful and informative.

Michael (Mike) E. Batts is a CPA and the managing partner of Batts Morrison Wales & Lee, P.A., an accounting firm dedicated exclusively to serving nonprofit organizations across the United States.

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