 |
|
|
TOP LEVEL
Departments
Education
Can Granny Pay Johnny's Tuition?
|
|
|
|
Author: Gina Furne
|
Publishing date: 01/29/2007 12:00 am
|
|
Here are some suggestions that might help you and your school keep out of trouble, when a student's relative wants to contribute to their school stipulating that it go on a student's account through the worthy student fund...
|
Yes, certainly, money is always welcome at any church school. Unfortunately, the rest of the question usually is, "and get a tax deduction?"
Is there a school administrator who has not received a check from a grandma (or some other relative) stipulating that it go on a grandson's or granddaughter's account through the worthly student? "Oh and yes, please send a receipt for the donation." I saw this fairly often as an academy treasurer.
What did I do when that happened? I usually ended up receipting it directly to the student's account after talking to the donor. In some cases, I returned the check. That really breaks the heart of a treasurer, as you know.
Is there a way to make Granny happy with her tax deduction and still help Johnny? Perhaps.
IRS Publication 526 says, "You cannot deduct contributions to specific individuals...who are needy or worthy. This includes contributions to a qualified organization if you indicate that your contribution is for a specific person. But you can deduct a contribution that you give to a qualified organization that in turn helps needy or worthy individuals if you do not indicate that your contribution is for a specific person."
Here are some suggestions that might help you and your school to keep out of trouble.
Every organization should have written criteria defining its worthy student program.
A written application form is a must to document the process of awarding aid. A committee should administer the funds. Minutes of the meetings will serve as an important proof should questions arise.
Perhaps another recommendation is necessary. Accept no hanky-panky in the administration of the rules. No off the record agreements are allowed. "Yes, I understand the rules, but just this one time..."
If Johnny meets the criteria for receiving assistance, he applies and receives whatever help is available.
Granny makes her payment to the worthy student fund of the school, or whatever it is called, with no linkage to Johnny. Granny gets her tax deduction. The fact that a relative is receiving a benefit does not preclude a tax, as long as the rules are followed.
If Johnny needs additional assistance, Granny could give the help needed directly, but this portion would not be a contribution, of course.
It is not worth it to try to do an end-run around the law. It jeopardizes your organizations's tax exemption, possibly subjects someone to penalties, and is certainly not a very good Christian example.
Sometimes individuals suggest a course of action, not because they are dishonest, but because they have heard something could be done and doesn't know any better.
It is your job as a responsible administrator to gently guide them into the proper path, one that will keep you and them out of trouble.
|
|
 |
Printer-friendly page
Send this page to a friend