You may choose any recordkeeping system suited for your ministry that clearly shows your income and expenses. Your recordkeeping system should include a summary of all ministry transactions. This summary is ordinarily made in some type of bookkeeping account.

Supporting Documents

Purchases, sales, payroll, and other transactions you have in your ministry will generate supporting documents. Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. These documents contain the information you need to record. It is important to keep these documents because they support the entries on your tax return. You should keep them in an orderly fashion and in a safe place. For instance, organize them by year and type of income or expense.

The following are some of the types of records you should keep:

Gross receipts are the income you receive from your ministry. You should keep supporting documents that show the amounts and sources of your gross receipts. Documents for gross receipts include the following:

• • Cash register tapes
  • Deposit information (cash and credit sales)
  • Receipt books
  • Invoices
  • Forms 1099-MISC

Purchases are the items you buy.  Your supporting documents should identify the payee, the amount paid, proof of payment, the date incurred, and include a description of the item to show that the amount was for purchases. Documents for purchases include the following:

• • Canceled checks or other documents reflecting proof of payment/electronic funds transferred
  • Cash register tape receipts
  • Credit card receipts and statements
  • Invoices

Note: A combination of supporting documents may be needed to substantiate all elements of the purchase.

Expenses are the costs you incur (other than purchases) to carry on your ministry. Your supporting documents should identify the payee, the amount paid, proof of payment, the date incurred, and include a description of the item purchased or service received that shows the amount was for a ministry expense. Documents for expenses include the following:

• • Canceled checks or other documents reflecting proof of payment/electronic funds transferred
  • Cash register tape receipts
  • Account statements
  • Credit card receipts and statements
  • Invoices

Note: A combination of supporting documents may be needed to substantiate all elements of the expense.

Travel, Transportation, Entertainment, and Gift Expenses
If you deduct travel, entertainment, gift, or transportation expenses, you must be able to prove (substantiate) certain elements of expenses.  For additional information, refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses.

Assets are the property, such as computers and furniture, that you own and use in your ministry. You must keep records to verify certain information about your assets. You need records to compute the annual depreciation and the gain or loss when you sell the assets. Documents for assets should show the following information:

• When and how you acquired the assets
• Purchase price
• Cost of any improvements
• Section 179 deduction taken
• Deductions taken for depreciation
• Deductions taken for casualty losses, such as losses resulting from fires or storms
• How you used the asset
• When and how you disposed of the asset
• Selling price
• Expenses of sale

The following documents may show this information.

• Purchase and sales invoices
• Real estate closing statements

• • Canceled checks or other documents that identify payee, amount, and proof of payment/electronic funds transferred

Clergy Financial Resources offers several options to help you with your tax questions or filing. We have listed one great support option to get started. 

Pro Advisor I Tax Support
This support service provides you comprehensive answers to your notice questions. This support service is available at a flat rate of $45.00 for each 30-minutes session.

Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421-0101 
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com