Managing Your Church

Churches need to report each employee’s taxable income and withheld income taxes as well as Social Security and Medicare taxes on Form W-2, and furnish copies B, C, and two of the 2011 Form W-2 to each employee by January 31, 2012. Copy A should be submitted to the Social Security Administration by February 29, 2012, along with Form W-3, Transmittal of Wage and Tax Statements. If your employees give their consent, you may be able to furnish Forms W-2 to your employees electronically. Electronic forms are due April 2, 2012. See IRS Publication 15-A for additional information.

Form 1099s are due on February 29, 2012, for the 2011 tax year, and churches that need to issue these forms should take note this year: a failure to send them on time has doubled from $50 per form to $100 per form.

If you do not have all the information needed to complete a Form 1099 (such as a Social Security number), you can still file it incomplete by February 29. As long as you secure the missing information and file the amended Form 1099 before August 1, 2012, then no penalties will apply. By the way, if you file the Form 1099 within 30 days after February 29, the $100 penalty is reduced to $30. If you file Form 1099 more than 30 days after February 29, but before August 1, 2012, the penalty is reduced to $60 per form.

The IRS projects collecting big bucks from these penalties over the next few years. Churches should check—and double check—to make certain Form 1099s are issued to all unincorporated businesses that provided services of $600 or more to them during 2011. This includes sole proprietorships, partnerships, and limited liability corporations (LLCs). You can verify the business information via a Form W-9.

For more information related to churches and taxes, check out the 2012 Church & Clergy Tax Guide.

4. “Professional development. People are dying for this. Any kind of denominational conferences and events—find out what you can do. These are often more affordable than what’s offered in the outside market. Doing this also enrolls people philosophically and emotionally into the mission of the denomination at the national and international levels. It allows them to network and learn. People come back fired up from these things. For the most part, people are really excited because it’s an investment in their future.

Two separate reports released within the past week on electronic banking and giving patterns underscore the shifting preferences among adults when it comes to their finances.

Last Thursday, the Pew Internet & American Life Project released its Real Time Charitable Giving report, which shows 1 in 5 American adults have made a charitable contribution through a website and nearly 1 in 10 have done the same via mobile phone text. On Monday, global accounting giant PricewaterhouseCoopers LLP projected digital systems will become the preferred method for banking by adults by 2015, according to a Bloomberg news report. That's based on a PwC-led study of more than 3,000 banking customers worldwide.

This shift to embrace electronic financial tools isn't new and it isn't going away. The takeaways for churches are many. A year ago, Brian Kluth explained the seven reasons churches should offer e-giving options now. At least two church leader discussion boards recently carried threads about e-giving as a percentage of total giving, with many indicating the electronic options represent anywhere from 10 percent to as high as 30 percent of their weekly collections.

As 2012 unfolds, what's the split between e-giving and more traditional methods, such as checks and cash, at your church? How is that split changing your church's thinking, if at all, about how tithes and offerings are collected?

Editor’s Note: Liz Ryan spent 20 years as a corporate human resources leader. During that time, she saw the best and worst of how employers treat their employees. She’s now a full-time writer and consultant on workplaces and writes a regular column for Bloomberg Businessweek, all with the goal of “bringing more humanity into the workplace,” as she puts it. And she has a unique perspective on church culture—as an accomplished vocalist, she often tours churches in Colorado where she lives. Through those visits, she has gained an appreciation for the dynamics at work with church pastors and personnel.

She recently sat down with Matt Branaugh, editor of ManagingYourChurch.com, to talk more about how churches as employers can reward and honor their employees. As the 2012-2013 Compensation Handbook for Church Staff highlights, raises are hit or miss, depending on place, position, and person. Not to fret, Ryan says. There are a lot of positive things church leaders can do—whether or not money is available for raises.

In Part 1 today, Ryan talks about the first four ways churches can reward and recognize employees when raises aren’t possible. In Part 2, she talks about the final three ways and her thoughts about the how and why of implementation:

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What is one immediate thing many churches can do to reward staff, absent of a pay raise or a new health benefit, but might overlook?

In a ringing endorsement of religious liberty, the United States Supreme Court today unanimously affirmed the so-called “ministerial exception” barring civil court review of employment disputes between churches and ministers. The ministerial exception has been applied to a wide range of employment disputes by state and federal courts over the past half century, but has never before been addressed by the Supreme Court.

Several months ago the Court accepted an appeal of a federal appeals court’s decision rejecting the application of the ministerial exception to a claim of disability discrimination by a “called” teacher in a Lutheran secondary school in Michigan who was regarded as a commissioned minis-ter by her church. The appeals court concluded that the exception did not apply because the teacher’s duties as a “called” teacher were identical to the duties she previously performed as a lay teacher, and her “religious” duties comprised only 45 minutes of each workday.

On January 11, 2012, the Supreme Court issued a decision explicitly recognizing the ministerial exception and concluding that it barred the civil courts from resolving the Lutheran teacher’s disability claim. The Court concluded that the First Amendment prevents the civil courts from “interfering with the freedom of religious groups to select” their clergy.

Check back for more updates here regarding today's development, as well as new updates on ChurchLawAndTax.com and on our sister site ChristianityToday.com.Richard Hammar also will provide complete in-depth coverage on this decision in the March/April edition of Church Law & Tax Report.

Let’s assume you’ve decided to have your tax return prepared by a professional. The next step is to find someone who is experienced and competent in the preparation of ministers’ tax returns. Here are some tips to help you find such a person:

• If possible, stick with a CPA or tax attorney. These professionals have completed a rigorous educational program, passed a difficult qualifying examination, and are subject to a comprehensive body of professional ethics.

How much are the pastors of Protestant churches nationwide earning these days?

The chart below shows the national averages for compensation and benefits earned by full-time senior pastors, based on Christianity Today's biannual survey of 4,600 churches nationwide. The survey provided valuable, detailed data on 13 church staff positions (including compensation levels based on personnel characteristics like years employed, denomination, region, gender, and education) for the 2012-2013 Compensation Handbook for Church Staff.

Among the findings of the survey: Senior pastors reported salaries and benefits that, on average, were 2.7 percent higher than those reported for the preceding 2010-2011 Compensation Handbook for Church Staff:

In this two-minute video, Vonna Laue, an Editorial Advisor for Christianity Today's Church Management Team, discusses why adequate financial internal controls are critical to the operations of the church.

The management of church money is a complex task for any church finance manager, treasurer, business administrator, bookkeeper, or pastor. The Essential Guide to Church Finances will help you strategize, organize, measure, communicate, protect and audit the financials of your ministry—available at YourChurchResources.com.

December often brings more contributions to churches than any other month. Be prepared to handle year end contributions accurately by listening to Richard Hammar describe a number of important rules that apply to year end giving in the video below:

To learn more about how tax laws apply to your church, read Richard Hammar's 2012 Church & Clergy Tax Guide.