Religious Organizations
Audits, reviews, internal controls, and clergy tax guidance for churches, dioceses, ministries, and their related schools and cemeteries.
Overview
Churches, dioceses, and ministries hold a unique place in the tax system. Churches are generally exempt from filing Form 990, but that does not reduce the need for sound financial practices. Congregations and donors expect offerings to be counted, recorded, and spent as intended, and lenders, denominational bodies, and grantors may ask for audited or reviewed financial statements. Pease Bell works with religious organizations on audits and reviews, internal controls, and the tax matters specific to clergy and ministry staff.
Many religious organizations also operate related entities such as schools, cemeteries, camps, or social service ministries, each with its own reporting needs. We help leaders understand how these entities fit together financially and what each one must report. We also help with clergy tax considerations, including the housing allowance under IRC Section 107 and clergy’s dual tax status, so payroll and compensation are handled correctly.
How We Help Religious Organizations
Audits and Reviews
Audits and reviews of financial statements for churches, dioceses, and ministries whose lenders, denominational bodies, donors, or governing boards call for independent reporting on their finances.
Offering Controls
Review of how weekly offerings and online gifts are collected, counted, deposited, and recorded, with practical recommendations that fit congregations that rely heavily on volunteers.
Clergy Tax Guidance
Guidance on the minister’s housing allowance under IRC Section 107, clergy’s dual status for income and self-employment tax, and the related payroll and W-2 reporting churches must handle.
Related Entity Reporting
Accounting support for schools, cemeteries, camps, and other affiliated ministries, including how they are reported alongside or separate from the parish, congregation, or sponsoring ministry.
Restricted Gift Accounting
Help tracking and reporting designated and donor-restricted gifts, building funds, and endowments so restrictions are honored and reported clearly to leadership, finance councils, and donors.
Unrelated Business Income
Review of rental, bookstore, event, and other activities that may generate unrelated business income, and preparation of Form 990-T where the organization is required to file one.
Challenges We Help Religious Organizations Address
- ✓Protecting offerings with limited staff and many volunteers
- ✓Setting and documenting clergy housing allowances correctly
- ✓Tracking designated gifts and building fund restrictions
- ✓Reporting for schools, cemeteries, and other related entities
- ✓Meeting lender or denominational requests for audited financials
Frequently Asked Questions
Do churches have to file Form 990?
Generally no. Churches, their integrated auxiliaries, and conventions or associations of churches are exempt from filing Form 990. However, they may still need to file Form 990-T for unrelated business income, along with payroll tax filings for employees. Other religious organizations that are not churches may be required to file a Form 990.
What is a minister’s housing allowance?
Under IRC Section 107, a minister may exclude from federal income tax an amount designated in advance by the church as a housing allowance, limited to actual housing costs and other limits. The allowance is still subject to self-employment tax. Proper designation and documentation matter, and we help churches and clergy handle it correctly.
How are pastors taxed?
Ministers have dual tax status. For federal income tax, they are usually treated as employees of the church and receive a Form W-2, but for Social Security and Medicare they are generally treated as self-employed and pay self-employment tax. Churches typically do not withhold FICA for ministers. We help churches set up payroll and compensation correctly.
Does a church need an audit?
Most churches are not legally required to have an audit, but lenders, denominational bodies, grantors, or the church’s own bylaws may require one. An audit or review also helps build trust with members and donors. Pease Bell can help you choose between an audit, a review, or another level of service.
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Contact Us
Tell us about your organization and a member of our team will be in touch.