Churches and other religious organizations have special tax laws in recognition of their rights under the First Amendment. Since state and federal tax laws change from time to time and with the possibility of jeopardizing your tax-exempt status, it’s always important to consult a tax professional or visit IRS.gov if you have questions.
The laws regarding religious organizations do not specify the length of time that contribution records be kept. Still, in the event that they are needed to administer federal tax law (i.e., an audit), it is recommended that records are kept for at least seven years. This is the maximum period that the IRS can go back to administer an audit. In addition to contribution records, the following are also recommended to be retained for seven years:
- Bank statements
- Checks and reconciliations
- Acquisitions and disposition of property
- Accounts Payable records
- Accounts Receivable records
- Payroll tax records and registers
Electronic backup in PDF format is the best way to retain this information. Be sure the information is protected in the event of a fire, flood, or computer virus. Other records are essential to retain permanently (please consult the IRS website for details). Many church management systems can help you retain church contribution records and store information offsite in a secure environment. These systems also allow contributors access to their giving history, eliminating the need for church staff to be overwhelmed during tax season or in the event of a congregant or parishioner’s personal audit.
Take a look at how we can help your church or parish manage your financial records and more with a personal demo of Realm church software.