Many ministries today are using cash donation apps to give their donors more options for
giving, but are these apps ok for churches to use? We at Luke 9:23 Ministries would like to share some information about these apps in an effort to serve and protect your ministries. Here are some facts about these apps that you may not be aware of.
- These apps do have IRS implications and they can be set up as a personal or ministry/business account. When a ministry sets up one of these apps, it's often unintentionally set up as a personal account rather than a ministry account. The IRS has said that any donations given to a personal account does NOT qualify as a tax deductible donation. That means any donation that is given through this app, if it's set up as a personal account, cannot be added to the donor's giving statement.
- Additionally, the IRS changed their reporting requirements in 2022 requiring these apps (Venmo, CashApp, Zelle and Paypal) to report income for anyone who received more than $600 in the calendar year. If the app is set up as a personal account, rather than a ministry account, it's treated as a personal account and that person will have those donations reported to the IRS as personal salary instead of donations to the ministry. The app will then send that person a 1099-K form.
- These apps do not qualify for the record retention requirement that the IRS states ministries should have. Oftentimes, they don't contain all of the information required for each donation.
- Using Venmo for churches is actually prohibited by Venmo in their terms of service. If they become aware that you are using Venmo to collect donations, it is a violation of their terms and they will suspend or cancel your account.
- CashApp has similar wording in their terms and conditions, stating that all donations sent do not qualify as a tax deductible donation. Again, that means that any donation given through this app cannot be included on the donor's giving statement.
- There has been a recent increase in Zelle fraud where hackers get into Zelle accounts and take the funds. More and more banks are saying they will not protect that money so if you are using Zelle and someone hacks into it, you may be out of luck getting those funds back!
So what can your ministry do?
- The first step is to make sure if you are using any of these apps, that your ministry is listed as the account holder. Make sure the address and any other information is the ministry's information and not a person's information. One way to check to see if you have a business vs personal account is to see if you are being charged fees for each donation. If you are not, chances are you have a personal account, even if it's under the ministry name. You will need to switch it to a business account right away!
- Make sure that if you receive a 1099-K form from any of these apps, you save it and give it to your tax preparer. It will need to be reported on your taxes.
- We recommend not using these apps at all for donations! There are other apps that are very user friendly, made for churches and give donors the option to cover the merchant fees like Planning Center or Subsplash.
Please feel free to reach out to us if you have any questions about giving apps. We would love to help!