Updated and Expanded for 990EZ, UBIT, the Tax Cuts and Jobs Act, and so much more!

Buy the paperback and get the e-Book for only $3.95 more.

Overworked or volunteer administrators may not be equipped with the most up-to-date accounting knowledge that affects their church's ability to accept donations, oversee a benevolence fund, file church payroll, and offer a compensation package for their minister. Lisa London, the accountant who brought you QuickBooks for Churches & Nonprofits, understands and wrote this must-have reference to take the hassle out of church bookkeeping.

In this book, London delves into the specialized needs of church accounting for church administrators and volunteers, including:

• Essential steps for starting a church

• Easy to learn internal controls to prevent fraud or error

• How to select church accounting software

• Recording and acknowledging church contributions, including vehicle donations and love offerings

• Benevolence fund management for your congregation's best interest

• Calculating and filing employee payroll 

• Bill paying across programs and the impact of Tax Cuts and Jobs Act of 2017 on Accountable Reimbursements Plans. 

• How to design and implement a compensation package for your minister, including a housing allowance, pastor payroll, and compensation package

• Understanding accounting and the important financial reports

• Giving your members all the information they need

• Preparation for an annual audit

• Budgets and forecasting future church growth

• Unrelated Business Income Taxes (UBIT) and how to complete a 990EZ.

We understand that the church staff needs to support its ministry with strong controls on the assets and a handle on the finance function. Our goal is to make accounting transactions easier with simple instructions, straightforward training and resources, so you can spend less time on the church accounting and more on your ministry.

Authors Bios

Vickey Boatright, the accountant behind www.freechurchaccounting.com, joins London in helping you set up accounting spreadsheets, explaining different types of accounting packages, and guiding you through every imaginable aspect of church bookkeeping. Terressa Pierce of freechurchforms.com brings her 30+ years of expertise as she advises you on how to rearrange your church office. Together, this powerful trio will help you master the nuts and bolts of church accounting with ease.

Lisa London is a CPA and top-selling author with decades of experience who has helped organizations reduce their accounting time dramatically. The Accountant Beside You series has been sold in all 50 states and every inhabitable continent.  In addition to her detailed e- and print books, Lisa London offers supplemental and often free information online at www.accountantbesideyou.com and through her popular YouTube videos and webinars. If you are already using QuickBooks for your church, consider investing in QuickBooks for Nonprofits & Churches or save money by purchasing a church accounting bundle. 

Whether you're just starting your church accounting journey or if you've been with the same spiritual home for years, The Accountant Beside You will be there every step of the way!

Contents & Features

1. HOW and the IRS-Administrative Issues 1

A. IRS definition of a Church 1

B. Section 501(c)3 Tax-Exempt Status 2

C. Basic Steps to Start a New Church 2

D. Church By-Laws 4

E. Organize the Office 5

F. What Needs to be Saved? Record Retention 10

G. Summary 12

2. Proper Procedures and Internal Accounting Controls 13

A. The Need for Strong Internal Controls 14

B. Governing Body's Responsibility 14

C. Separation of Duties with a Small Staff 15

D. Controls for Receiving Cash & Donations 16

E. Donor Acknowledgments 19

F. Fundraisers and Controls 19

G. Cash Out—Controls for Paying Bills & Credit Cards 20

H. Check Signers 21

I. Paying Bills 21

J. Automatic Drafts 22

K. Petty Cash 23

L. Gift Cards or Prepaid Store Cards 24

M. Credit Cards 24

N. Controls Against Duplicate Payments 25

O. Payroll 25

P. Summary 26

3. What is Special About Church Accounting? 27

A. Accountant's Speak—Modified Fund Accounting 27

B. Accounting 101 30

C. Cash vs. Accrual Accounting Methods 31

D. Chart of Accounts 32

E. Naming the Accounts 33

F. Basic Bookkeeping 34

G. Reporting Differences 35

H. Differences in Terminology 37

I. Summary 38

4. How do I Select a Church Accounting System? 39

A. Spreadsheets 39

B. Off-The-Shelf Accounting Software 41

C. Church-Specific Accounting Software 41

D. Online Accounting Packages 41

E. How to Evaluate Accounting Software for Your Church 42

F. Summary 43

5. Contributions—Part I: Receiving and Recording 44

A. Internal Controls and Written Policies 44

B. Counting the Weekly Offering 44

C. Offering Envelopes 46

D. Making the Deposits 47

E. Recording Donor's Contributions 47

F. Donation Stacking 48

G. Credit Card Donations and Online Giving 49

H. Stock Donations 51

I. Donor-Advised Funds (DAF) 52

J. Summary 54

6. Contributions—Part II: Acknowledging 55

A. Cash Contributions 55

B. Quid Pro Quo-Something for Something 57

C. When You Do Not Need Disclosure Statements 59

D. Non-Cash Contributions 62

E. Gifts of Autos, Boats, and Airplanes 67

F. Summary 70

7. Contributions—Part 3: Other Topics 71

A. Gifts to Specific Individuals 71

B. Donated Labor/Services 73

C. Recording Donated Items as In-Kind Contributions 74

D. Discount Donations 74

E. Checks Written to Another Charity 74

F. Capital Campaigns 75

G. Summary 77

8. Benevolence Policy 78

A. Requirements 79

B. Discretionary Benevolence Funds 80

C. Benevolence for Employees 80

D. Earmarked Benevolence Contributions 81

E. Disbursement Procedures 82

F. Written Benevolence Policy Example 82

G. Summary 83

9. Paying the Bills 84

A. Terminology 84

B. Approving and Paying the Bills 84

C. Scams 85

D. Church Insurance and Contracts 86

E. Entering Data 87

F. Allocation of Expenses 88

G. Bills Drafted out of the Bank Account 89

H. Credit Card Payments 89

I. Petty Cash Replenishment 90

J. Recording a Mortgage 91

K. Summary 92

10. Reimbursement Policies and Procedures 93

A. Setting up a Reimbursement Policy 93

B. Example of a Reimbursement Policy Resolution 94

C. Employee Business Expenses to be Included 95

D. Reimbursing the Expense 97

E. Advance Payments 100

F. Ticketless Airline Expenses 101

G. Ramifications of Not Following the Policy 102

H. Inability to Reimburse a Valid Expense 102

I. Summary 102

11. Payroll—Part I: Basic Steps 103

A. Terminology 103

B. Forms & Publications 104

C. Setting up the Payroll 105

D. Determine Pay Period 110

E. Employee Form I-9 110

F. Employee Form W-4 111

G. New Hire Reporting 112

H. Establish Your Payroll Records 113

I. Summary 113

12. Payroll—Part II: Calculating & Filing 114

A. Wage Bracket Method 114

B. Percentage Method 117

C. State Tax Withholding 119

D. FICA—Social Security & Medicare Taxes 119

E. The Employee's Payroll Check 120

F. Posting the Payroll Expense 122

G. Other Taxes 122

H. Payroll Tax Deposits 123

I. Payroll Tax Filings 124

J. Year-End Filings 129

K. Summary 133

13. Payroll—Part III: Ministers and the IRS 134

A. Who is a Minister (for Tax Purposes) 134

B. Employee or Independent Contractor 135

C. Housing or Parsonage Allowance 136

D. Income to be Reported by a Minister 142

E. Exemption for Self-Employment Tax 143

F. Tax Filings for Ministers 143

G. Designing a Minister Compensation Package 148

H. Medical Sharing Ministries 153

I. Summary 154

14. Budgeting for Religious Organizations 155

A. The Budget Process 155

B. Example Budget Spreadsheet 157

C. Monthly Budgeting 158

D. Forecasts 159

E. Cash Flow Analysis 161

F. Summary 161

15. Month-End Financial Requirements 162

A. Monthly Processes for Complete Financials 162

B. Bank Reconciliation 162

C. Investment Account Reconciliations 165

D. Generate Reports 167

E. Summary 171

16. Year-end and Audit Issues 172

A. Forms W-2 and W-3 172

B. Form 944, Employer's ANNUAL Federal Tax Return 172

C. Forms 1099-NEC (Nonemployee Compensation) 175

D. Form 1099-Misc 176

E. Form 1096 178

F. Year-end Donor Acknowledgments 179

G. State Filings 180

H. Audit Needs 180

I. Summary 181

17. Unrelated Business Income Taxes (UBIT) 182

A. What is Unrelated Business Income? 182

B. “Trade or Business” 183

C. “Regularly Conducted” 184

D. “Not Substantially Related” To The Mission 184

E. Excluded Trade/Business Activities 186

F. Examples 188

G. Miscellaneous Excluded Revenues 190

H. IRS Form 990-T 191

I. Summary 198

18. Form 990 Annual Filings for Exempt Organizations 199

A. Is a Form 990 Required? 199

B. Types of 990s 199

C. IRS Summary of Forms to File 201

D. Completing Form 990-N (e-Postcard) 201

E. Completing Form 990-EZ Short Form Return 207

F. Schedule A (Public Charity Status & Public Support) 218

G. Schedule B (Schedule of Contributors) 220

H. Summary 222

Appendix 223

A. Example Chart of Accounts 223

B. Month-End Checklist 232

C. IRS Website Addresses 233

Index 235

Book Information

Title Church Accounting: The How-To Guide for Small & Growing Churches

Author Lisa London, CPA and Vickey Boatright

ISNI 0000 0004 5059 7909

ISBN 978-1-945561-17-7

Library of Congress Number 2020920379

Published November 2020 by Deep River Press, Inc.

Copyright 2020 Deep River Press, Inc. 

Pages 235

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