Working with Soft Donors
Crediting Soft Donors
Donors Who Are Always Soft Credited
Applying multiple Soft Credit Donors to a single Donation record
Handling IRA Donations
Withdrawals from traditional IRA accounts are taxed unless the withdrawn funds are donated directly to charity. However, IRA accounts differ in both account types and age restrictions; together these two factors determine whether a withdrawal is taxed. Special consideration should be given to how your church will handle these donations.
In regards to recording an IRA Donation in MinistryPlatform, a church can:
- Credit the brokerage firm and give soft credit to the Donor (assuming the Donation was most likely not taxed).
- A year end contribution statement can be sent to the brokerage firm "Donor" at the church's discretion or provided upon request.
- or, Create a Program (fund) for "IRA Distribution" and assign Donations accordingly.
- If the "IRS Distribution" Program is set as tax deductible = True, Donations will appear on the Donor's year end contribution statement.
- If the "IRS Distribution" Program is set as tax deductible = False, Donations will not appear on the year end contribution statement.
- A year end summary (e.g. Selected Donor Donation Listing report) can be sent to the Donor at the church's discretion or provided upon request.
- Or, a per Donation acknowledgement (e.g. Selected Donation Letter) can be sent to the Donor at the church's discretion or provided upon request.
- or, Create a Payment Type for "IRA Distribution" that, like the Non-Cash/Asset payment type, has Omit Amount On Statement = True and assign Donations accordingly.
- This will display these type Donations on the Donor's year end contribution statement as going to the desired Program, but with a $0 value.
Churches who include all IRA Donations on their statements in any form place the responsibility on the Donor to report this Donation correctly given their own age and IRA account type. We recommend that such Donations be given a memo stating this (i.e. that it is the responsibility of the Donor to determine if their IRA withdrawal is tax deductible or not) and a statement be used that includes the memo column.
Note: This does not constitute tax advice. Please consult a tax professional to determine the appropriate approach for your specific church and specific scenario.
When to NOT Use Soft Credit
- Soft Credit is not the right choice for "payroll deductions" where the employer sends the church a check on behalf of their employees. In this case, the employer is merely a conduit. The employer will not issue the employee a statement. In this particular situation, we recommend making explicit actual donations on the employee records. The most common case will be when your church is the employer who is doing this for your own employees.
- Soft Credit is not an alternative to putting "Non-deductible" donations in MinistryPlatform. If someone makes a gift that must credit a Pledge, but is not to have an explicit amount calculated into their IRS statement total, then this is a Donation that should either be distributed to a Non-deductible Program or it should be a "Non-cash/Asset" donation.