Reimbursement Policies
Reimbursement Policies Many religious organizations have made fixed sum monthly payments to their minister or other staff for a “travel or professional allowance” and do not request an accounting for how the money was spent. Allowance plans are always taxable are reported on Form W-2. It is strongly recommended that the congregation establish an Accountable…
Clergy Housing Allowance
Clergy Housing Allowance Ministers who own their home can not only take advantage of the housing allowance by including mortgage payments as housing expenses but also can deduct mortgage interest and property taxes on their itemized deductions. This is often referred to as a “double deduction. Once ministers pay off their mortgages, however, they can…
Quarterly Payments Tips
Quarterly Payments Tips In a non-clergy job, the employer withholds an employee’s federal income tax and Social Security tax from every paycheck. But clergy are classified as dual status employees and are exempt from both federal income tax withholding and considered self-employed for Social Security tax purposes. This means a church normally won’t withhold income tax and…
What Does Clergy Dual Status Mean?
What Does Clergy Dual Status Mean? Under federal law, most ministers have dual tax status. Dual tax status means a minister is an employee of the church for federal income tax purposes, and self-employed for Social Security and Medicare taxes. For ministers, wages are reported in two different ways: Federal Income Tax = Employee status…
Limitations on the Housing Allowance
Limitations on the Housing Allowance After reading about the Housing or Parsonage / Manse Allowance, you may be thinking, “if I designate my entire salary as a Housing Allowance, would it all be excluded from federal income taxes?” IRS has already addressed this by limiting the Allowance to the least of the following: 1. The…
Should You Start a Nonprofit Organization?
Should You Start a Nonprofit Organization? There are numerous legal, financial, and administrative details required to start a nonprofit organization. A corporate entity must be formed with the appropriate state agency. This requires selecting an available corporate name. An Employer Identification Number is needed from the IRS, which will require some knowledge of anticipated activities…
Do you need to file a nonresident state return?
Do you need to file a nonresident state return? Generally, you’ll need to file a nonresident state return if you made money from sources in a state you don’t live in. Some examples are: Wages or income you earned while working in that state Out-of-state rental income, gambling winnings, or profits from property sales S…
Gathering documents for tax season
Gathering documents for tax season In preparation to file individual federal, state, and local income tax returns, this is the season to gather documents. Some of the documents need to be submitted with federal, local, and state tax returns, and will therefore be needed in the immediate future. Other documents should be retained by the…
Don’t miss the 100% meals deduction
Don’t miss the 100% meals deduction The Consolidated Appropriations Act, 2021, increased the business-meal deduction for the cost of food and beverages provided by a restaurant from 50 percent to 100 percent in 2021 and 2022 if certain conditions are met. The IRS on April 8 issued Notice 2021-25 to provide guidance on the higher limit for…
Can the church pay student loans tax-free?
Can the church pay student loans tax-free? The Coronavirus Aid Relief and Economic Security Act (the “CARES Act”) provides a way for churches to provide both tuition, books, supplies, and student loan payments tax-free through January 1, 2026. The Coronavirus Aid Relief and Economic Security Act (the “CARES Act”) of IRC Section 127 allows churches to reimburse up to $5,250 per employee, per…
