Is it a hobby or a business?
Whether it’s something they’ve been doing for years or something they just started to make extra money, taxpayers must report income earned from hobbies in 2020 on next year’s tax return. What the difference between a hobby and a business? A business operates to make a profit. People engage in a hobby for sport or…
FAQ: Can I only change my housing designation once a year?
No, you can change your designation at any time throughout the year, and you can amend it as needed. IRS details the housing allowance in section 107 of the Internal Revenue Code. While the IRS does not specify when you can designate, they do specify that designating must be done in advance. You can only…
CARES Act allows for coronavirus-related distribution from retirement
As the pandemic continues, many will experience economic hardship due to medical bills or due to a lost job. The CARES Act of 2020 provides some relief by allowing individuals to draw up to $10,000 from their retirement with minimized tax consequences. In order to qualify, you must meet one of the following criteria: Be…
Can a storage unit rental qualify for housing allowance?
Question – Can I claim storage unit rental as an expense related to housing allowance? Answer – No. IRS only allows expenses related to your primary residence. A separate storage unit is not attached to the home in any way, so it cannot be used as a housing expense. A similar situation occurs with utility…
Can I contribute to an HSA and an FSA at the same time?
Married clergy often have a choice of health options with their spouse. One common question is whether you can contribute to both an HSA and an FSA at the same time. The answer is usually no, but like most tax questions, there are a few exceptions. IRS publication 969 (https://www.irs.gov/pub/irs-pdf/p969.pdf) answers this question for us:…
What is the difference between vacation time and PTO?
Vacation policies are intended to be used for the specific purpose of vacation or leisure time, and churches who offer vacation time generally offer sick leave as well. The alternative to having two separate benefits is a singular Paid Time Off (PTO) benefit, which may be used for any purpose the employee chooses. Some states…
Best practices for deducting meals
Clergy can deduct the costs of ministry-related meals against their self-employment taxes, but not everyone knows the best practices for deducting meals. Here are some quick tips on deducting meals: Only deduct meals that are purchased for ministry purposes. If you are just buying a meal for yourself, that doesn’t count for a deduction. If…
If you pay a household employee, you may have to withhold taxes
If you have a housekeeper, maid, babysitter, gardener or other employee that you pay throughout the year, you may actually be liable for withholding taxes on their wages. Unlike service providers or independent contractors, household workers are technically your employees because you control the work they do and how they do it. If you do…
What is the Gift Tax Exemption in 2020?
If you gave a large gift or received a large gift, you may be wondering about gift tax. Here’s the details on this rare tax: Gift tax is never paid by the recipient. If someone gifts you $30,000, you don’t have file a gift tax return or pay gift tax. The giver is responsible for…
Tax-Filing in 2020: What Is My Tax Bracket?
If you are keeping an eye on next year’s taxes, you should know that the tax brackets for 2020 are available. All of the brackets are the same as 2019 (37%, 35%, 32%, 24%, 22% and 12%), but the thresholds have slightly increased. This means if you are earning the same taxable income in 2019…
