November 18, 2020
Treasurer's Tip # 10
Year-End Checklist for Treasurers, Parish Administrators, and Vestries
1. Designate a housing allowance for 2021.
The vestry should make sure a new housing allowance for every cleric on your staff is approved prior to the first payroll of 2021. Schedule this at your December vestry meeting and you will have it all ready to go for the new year. Even if your rector or associate lives in parish owned housing, he or she should have an allowance designated for utilities and other allowable expenses. Examples of resolutions for both cleric-owned and parish-owned housing are on our website (www.adosc.org) under “Clergy Employment”.
2. Prepare for any compensation changes in 2021.
If you are on the Diocesan payroll service, please let Susan Burns know as soon as possible of any changes in compensation for 2021. She has quite a number of churches for which to prepare, so will appreciate extra lead-time. In addition, if any of your employees have changed their health insurance status (Ex: family vs. single), please let her know so that the proper amount will be deducted with the first payroll of 2021. For clergy, a new Salary and Allowance Worksheet is requested along with your other parochial reports, however, to ensure changes are made timely, please complete those before the first payroll in January and send copies to both Susan Burns and Nancy Armstrong. The form will be posted on the Diocesan website by the end of December.
3. Notify your membership about when contributions are deductible.
The general rule is that contributions are deductible by the donor when delivered. Remind parishioners that a check deposited into the offering plate in January is not deductible for 2020, even if it is dated in December. However, checks that are mailed and postmarked in December are deemed to have been delivered by the postmark date. Electronic giving is considered delivered on the day the donor makes the charge.
4. Furnish a Year-End Statement of giving to donors.
Any individual contribution of $250 or more must be documented with a receipt in order for the donor to deduct it. Make sure everyone gets a year-end contribution statement of all his or her qualifying gifts.
5. Correctly handle bonuses or gifts to staff members.
Remember that all cash payments to staff members, even for Christmas gifts, is taxable income to the employee. These payments must be reported on the employee’s W-2 form. Sometimes churches make these payments through accounts payable, rather than through the payroll, but even so, they must be reported on the W-2. If you plan on bonuses to staff, and you are on the Diocesan Payroll service, please let Susan know about any payments outside of payroll so they can be properly reported. Non-cash gifts with a nominal value need not be reported.
6. Review classification of your church workers for IRS purposes.
It is extremely important that you have all your church workers classified properly. Sometimes the temptation in churches is to think that workers doing part-time work are not really employees but can be paid as independent contractors. This is especially true for organists, sextons and nursery workers. The IRS has strict rules on who is an employee and who is a contactor. On the Diocesan web site is a checklist to help you determine this. If there is ever any doubt, it is best to treat a worker as an employee to avoid back taxes, penalties, and interest if the IRS determines you have classified someone wrong. Generally, organists, sextons, and nursery workers are employees. There are some exceptions, but if you need help, please contact the Diocesan office to discuss this. January is the perfect time to make any necessary changes.
7. Review classification of employees for Department of Labor purposes.
Now is the time to decide if employees are property classified for wage and hour purposes. Job descriptions should be reviewed to determine if employees qualify for the ministerial exception (Youth ministers, Family Ministry, etc. for example). For all other employees, review job descriptions and salary amounts to determine if the employee is exempt or nonexempt from overtime wages. Please see Treasurer’s Tip #8 on the Diocesan web site for further discussion on this.
8. Report all taxable fringe benefits on W-2s.
One thing often overlooked is the value of life insurance premiums over $50,000 provided by the employer. All clergy who participate in our Diocesan 403b plan have such excess life insurance (most, depending on age, have $200,000.) The value of the premiums in excess of $50,000 must be reported in Box 1 of the W-2 and in Box 12 coded “C”. The IRS has a chart to help you calculate the reportable amount based on age and months on the policy, but Susan Burns will furnish that number for you. If you are on the Diocesan payroll service, she will make sure the proper amount is reported, and appears as GTL (group term life) on one of the December paychecks. If you are not on our payroll service, you will need to be responsible for making sure it shows up on the W-2 form. Call Susan if you have questions concerning this.
9. Prepare for issuing 1099’s to independent contractors.
Every independent contractor to whom you paid $600 or more during 2020 must be issued a 1099-NEC form for non-employee compensation. Start now to make sure you have their correct address and EIN number.
10. Voluntary withholding and W-4 forms.
Since clergy are exempt from Social Security, Medicare, and federal income tax withholding, they use the quarterly estimated tax procedure to prepay their federal taxes. However, clergy may enter into a voluntary withholding arrangement with their church by submitting written authorization to the church treasurer. The ideal time to do this is in January, so remind them that this is an option. In addition, lay employees should review their withholdings and submit an updated W-4 form for the coming year.
11. Other items to consider:
- Reconcile your donor gifts totals to your general ledger and investigate any differences. This is an important internal control.
- Review detailed property lists and reconcile general ledger depreciation to your schedule.
- Review insurance policies to ensure they are adequate
- Year- end is a good time to destroy any old records to make room for new. Please be sure you use our recommended retention schedule and make a record of anything you destroy.
- Review all bank accounts and signers. Some bank accounts not being used should be closed, and those that are being used may need updated signers.
- Start gathering data for your parochial reports. Look at last year’s as a starting point.
If you have any questions not answered above, please contact me, Nancy Armstrong.
Nancy Armstrong
Assistant Treasurer
The Anglican Diocese of South Carolina
(843) 722-4075
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