Should I have a Social Security Allowance?
Should I have a Social Security Allowance? While ministers are employees for federal income tax reporting purposes, they are self-employed for Social Security purposes with respect to services they perform in the exercise of their ministry. This means that they must pay both the employee and the employer share of social security tax under the…
Repay student loans up to $5,250 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. Generally, a Section 127 Education Assistance Plan only allows the church to pay or reimburse tuition and other qualified educational expenses. Section 2206 of the CARES Act modifies…
What is exempt and non-exempt employee?
Exempt and non-exempt are classifications under the Fair Labor Standards Act (FLSA). That’s the federal law requiring that most employees receive at least minimum wage for each hour worked and overtime pay for hours worked over 40 in a workweek. Usually, employees who are entitled to both minimum wage and overtime are called non-exempt. Those…
Worker’s Compensation Insurance and Unemployment Benefits
Worker’s Compensation Insurance and Unemployment Benefits During this season when we pause to celebrate Labor Day, two important labor issues for churches to consider are worker’s compensation insurance coverage and unemployment taxes and benefits. Both of these issues can be confusing for churches. Worker’s Compensation Insurance: Worker’s Compensation insurance provides benefits for employees who are…
Safeguarding Form 4361 – Opting out of Social Security
Safeguarding Form 4361 – Opting out of Social Security A minister who wishes to be exempt from social security/Medicare tax must file a Form 4361 with the IRS for approval. Before your application can be approved, the IRS must verify that you are aware of the grounds for exemption and that you want the exemption…
What is segregation of duties?
What is segregation of duties? The segregation of duties is the assignment of various steps in a process to different people. The intent behind doing so is to eliminate instances in which someone could engage in theft or other fraudulent activities by having an excessive amount of control over a process. In essence, the following…
Is the Housing Allowance a deduction or exclusion?
Is the Housing Allowance a deduction or exclusion? The housing allowance is an exclusion from income, not a deduction. This means that the amount claimed is never reported to the Internal Revenue Service (IRS) as part of your annual income. A housing allowance can be taken only if the amount to be excluded is officially…
What clergy need to know about estimated payments
What clergy need to know about making 2021 estimated tax payments The United States income tax system is a pay-as-you-go tax system, which means that you must pay income tax as you earn or receive your income during the year. You can do this either through withholding or by making estimated tax payments. If you didn’t…
New Educators Guidelines – COVID-19 protective items
Educators can now deduct out-of-pocket expenses for COVID-19 protective items Eligible educators can deduct unreimbursed expenses for COVID-19 protective items to stop the spread of COVID-19 in the classroom. COVID-19 protective items include, but are not limited to: face masks; disinfectant for use against COVID-19; hand soap; hand sanitizer; disposable gloves; tape, paint, or chalk…
Mid-Year Review of Church Budget
Mid-Year Review of Church Budget Whether your church’s budget is based on the calendar year (January – December), or a different starting point based on the fiscal year, it is a good practice to re-visit the budget at some point during the year to see if projections are close to actual numbers. In light of…
