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 designate an allowance moving forward. You can never retroactively designate or change an allowance. This is why it is often good to over-estimate your allowance, just in case something happens during the year that merits more housing expense.
IRS auditing guidelines also specify that the designation “may appear in the minister’s employment contract, the church minutes, the church budget, or any other document indicating official action. Treas. Reg. § 1.107-1(b)”. A verbal designation is generally considered insufficient or can be difficult to prove in an audit. Keeping a written record is always safer.
While the IRS may not restrict when you change your designation, individual churches and religious organizations often have their own internal rules and regulations. If your church has rules that state you can only designate at the beginning of the year.
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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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