A check request is required to be filled out and turned into the NR office for all care fund requests. A bill, invoice or receipts must be obtained and attached to the request before a payment can be sent out.
Payments would need to go to the rental company, medical institution or power company etc. instead of directly to the individual. An invoice or bill would be needed for proper documentation of what the funds were used for and who they were paid to. If you feel you can’t obtain the documentation yourself then you can get in touch with NR and we can help you in obtaining what’s needed to process the request. We work with these types companies regularly and in these type of situations frequently and find that all parties are more than willing to help.
Ministries should also form a care fund committee for the express purpose of determining the recipients of the benevolence funds and the amounts they should receive to avoid any IRS issues of the distribution of funds.
Your program should include an assistance form that would need to be filled out by the recipient and should contain the need of the individual, the financial situation of the recipient, any steps taken by the recipient to improve their status if needed, a written statement of how you came up with the decision to help the person in need amongst all the others who are in need, the date and time of the decision, and who was included in the decision. This proof and proper documentation is acceptable by the IRS of it’s ability to see that no individual is receiving an individual benefit or being favored and that you have a proper program in place to run a care fund.
When the church wants to help a particular individual or family that has unusually high medical bills or other valid personal financial needs the church can offer setting up a trust fund at a local bank. Contributions to the trust fund would not be deductible for tax purposes to the donors and that payments from the trust fund would not represent taxable income to a needy individual or family. This method of helping the needy person or family is clearly a legal approach and represents personal gifts from one individual to another.
Care fund payments to non-employees when abiding by the IRS guidelines are never reportable on Form 1099-MISC (or any other information form) but care or benevolence payments to employees are reportable on Form W-2.
For more information on contributions to care and benevolence programs please see the guidelines on benevolence gifts.