Flat-dollar Reimbursements Taxable

Question: Employees often use their personal cell phones for church business. The church requires that they submit monthly expense reports and they’re reimbursed through an accountable plan. The church board wants to ditch the paperwork and just pay flat-dollar allowances to employees every month. Would that be taxable? Answer:  Yes, the allowances would be taxable because…

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Clergy Housing Lands in Seventh Circuit

Churches and the IRS joined forces Wednesday before a sympathetic Seventh Circuit panel to argue that a 65-year-old income tax housing exemption for clergy members does not violate the Constitution’s Equal Protection Clause. “The court has to take history into account,” said attorney Luke Goodrich of the nonprofit law firm Becket, a public-interest firm representing…

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Can employees take home old computers for free?

Question: Our church just completed a major upgrade of everyone’s computers. The computers that were replaced were ancient by today’s standards. Rather than throw them out, one staff member suggested that employees take their old computers home. He also said that since the computers are old, we don’t have to worry about taxes. The church board is uncomfortable with this nontaxable suggestion….

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So You’ve Lost Your Social Security Card

Losing important documents is frustrating, especially something as important as your Social Security card. You’ll want to consider whether you really need to get a replacement card. Knowing your number is what’s important, after all. You’ll rarely need the card itself — perhaps only when you get a new job and have to show it…

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What should the church include as income on a pastor’s W-2?

The first thing to understand is that the income tax code takes the position that any money paid to or for an employee is income unless specifically excluded by the tax code. In addition to the pastor’s base salary, there are some items the church may provide as fringe benefits to the pastor or other employees that…

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How To Create A Cell Phone Reimbursement Policy

Creating a policy for employee mobile phone reimbursement can be tricky. Unlike the rules surrounding other ministry expenses, IRS regulations governing employee cell phone use are ambiguous and in a state of flux. To date, no single model of cell phone reimbursement has become an industry norm. Churches need to carefully consider the model through…

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What Is a Church?

For purposes of U.S. tax law, churches are considered to be public charities, also known as Section 501(c)(3) organizations. As such, they are generally exempt from federal, state, and local income and property taxes. “Exempt” means they don’t have to pay these taxes. This is so even though they may earn substantial amounts of money. Not just anybody…

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Decide whether to file for recognition of tax-exempt status

The Internal Revenue Code provides an automatic federal tax exemption for churches. Some churches choose to file for formal recognition of tax-exempt status and some do not. The following questions may help a church to decide whether to file for tax-exempt status: • How large is the church expected to become? If the expected income is less than…

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How the 90-Day Mileage Log Rule Works

Often in an IRS audit, the examiner will ask for your mileage log at the beginning of the audit. If you do not have a mileage log, then you are in danger of losing more than just vehicle deductions. Think about it. If you don’t have a log for mileage, what is the IRS examiner…

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Don’t Let Your Tax Receipts Fade

Are your receipts too faint to read? This is a common problem with the thermal paper receipts that many restaurants use. Over time the images disappear, and if you leave them in the sun, you can almost watch the ink leave the thermal paper. Protect yourself. You need to scan or photocopy the thermal paper…

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