How to report honoraria income?
The best way to report honoraria income for clergy is to include it on Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship). This allows you to report the income and deduct any related expenses incurred in performing the services. Here are the steps to report honoraria income: Gather Documentation: Collect all 1099-MISC…
Explain how qualified charitable distributions work
Qualified Charitable Distributions (QCDs) are a tax-efficient way for individuals to donate to charity directly from their Individual Retirement Accounts (IRAs). Here’s a detailed explanation of how QCDs work, including eligibility criteria, tax treatment, and limitations or special rules that apply: Eligibility Criteria Age Requirement: The IRA owner must be at least 70½ years old…
Determining Worker Classifications
Exempt or Non-exempt? Classifying exempt and non-exempt church employees is just as crucial as distinguishing between independent contractors and employees. Generally, this involves a straightforward separation between salaried (exempt) and hourly (non-exempt) employees, but that is not the only criterion. Organizations must adhere to the Fair Labor Standards Act (FLSA) guidelines to determine the classification…
Defining a minister’s tax home related to travel deductions?
The IRS defines a taxpayer’s “tax home” for travel deductions under IRC § 162(a) as the taxpayer’s regular or principal place of business. If the taxpayer has no regular or principal place of business, the tax home is considered the taxpayer’s regular place of abode in a real and substantial sense. This definition is crucial for determining…
Understanding Clergy Dual Tax Status
Clergy are defined as dual status because they are treated differently for various tax purposes under the Internal Revenue Code (IRC) and Treasury Regulations. Specifically, clergy members are considered self-employed for Social Security and Medicare taxes under the Self-Employment Contributions Act (SECA). Still, they can be regarded as employees for income tax purposes. This dual…
Clergy Housing Allowance and FAFSA
Clergy housing allowance counts as income for FAFSA purposes. According to IRS guidelines, while the housing allowance is excludable from gross income for income tax purposes, it is not excludable for self-employment tax purposes. This means that the housing allowance must be included for the Free Application for Federal Student Aid (FAFSA), which considers both…
Should I issue Form W-2 or Form 1099-NEC for our minister?
Most churches will issue a Form W-2 to a minister for their compensation if the minister is considered an employee of the church. The determination of whether a minister is an employee or an independent contractor is crucial in deciding whether to issue Form W-2 or Form 1099-NEC. Here are the detailed guidelines and criteria…
Can a church rent space to a for profit business?
Renting to a profit-oriented business by a church is categorized as an unrelated business activity, which is not directly aligned with the purpose of the organization’s exempt status. Such activities must be reported on Federal Form 990-T and will be subject to tax. However, certain expenses can be allocated to reduce the income, including utilities,…
Determine the FRV housing limitation including furnishings and appurtenances
A common method for determining the fair rental value of clergy housing is using a fixed percentage, like 12%-15% of the current home value. However, this method may be inaccurate. The IRS and tax courts typically recommend using methods such as the comparable fair rental value or the comparable sales method from a third party…
Fines for Mismatched TIN and Name?
Did you know that submitting a mismatched Taxpayer Identification Number (TIN) and name combination can result in fines? If a mismatched name/TIN combination is submitted on your W-2 or 1099 filings, the IRS will issue a CP21000 or CP2100A Notice if the payee’s name and TIN do not match IRS records. This notice indicates that…
