Clergy pay, housing allowance and fund accounting.
Clergy compensation, housing allowance and fund accounting done correctly.
Clergy compensation is its own discipline
Russ is a Licensed Minister and does extensive work in church finance and operations, which is the reason we handle this work rather than referring it out. Clergy compensation follows rules that do not apply anywhere else in payroll, and generic payroll platforms configure it wrong by default.
Ministers are typically employees for income tax purposes and self-employed for Social Security and Medicare, which means no FICA withholding but a self-employment tax obligation. The housing allowance has to be designated in advance by official board action, is limited by the lesser of three tests, and is excluded from income tax but not from self-employment tax. A church that withholds FICA from a minister's pay, or designates a housing allowance retroactively, has created a problem that takes real work to unwind.
Fund accounting a board can read
Designated and restricted funds are the accounting characteristic that separates nonprofit books from business books. A building fund, a benevolence fund and a missions designation are not revenue the organization can spend freely, and tracking them in a spreadsheet alongside the accounting file guarantees the two disagree.
Configured properly in QuickBooks Online, fund balances live in the accounting system and appear on a report the board can actually understand, which is usually the first time treasurers stop dreading the monthly meeting.
Volunteer treasurer turnover
The structural weakness in most small church and nonprofit finance operations is that the entire process lives in one volunteer's head. When that person steps down, the organization loses its institutional memory, and the next treasurer starts over.
Outsourcing the recurring mechanics, payroll, reconciliation and reporting, means turnover in the treasurer role is a change in oversight rather than a restart.
Compliance basics that get missed
Contribution acknowledgment letters with the required no-goods-or-services language. Correct treatment of love offerings and gifts to staff, which are usually taxable compensation. Accountable plan documentation for mileage and expense reimbursements. W-2 versus 1099 treatment for musicians, nursery workers and guest speakers.
None of these are difficult. All of them are commonly wrong, and they are the items that create problems years later.
Talk through your churches & nonprofits payroll
Bring your last return and a payroll register. We tell you what we would change and what it costs. No charge, no obligation.