Avoid Classifying Employees as Independent Contractors

Q. Can churches classify paid workers as independent contractors to avoid paying FICA or withholding income taxes from them? A. No. Churches cannot classify paid workers as independent contractors in an effort to save money. They must follow the law. For a non-clergy employee, the church generally must withhold income and FICA (Social Security and…

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Healthcare Penalty going away in 2019

Prior to 2019, if you failed to maintain adequate health insurance coverage, you could be assessed a penalty on your tax return. This penalty was based on your income and could be quite expensive if you went two or months without health care coverage. According to healthcare.gov, starting in 2019 the “Individual Shared Responsibility Penalty”…

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Dos and Don’ts of Cell Phone Deductions

Almost everyone seems to have a cell phone these days. If you own a cell phone and use it for Ministry work, you may be able to claim the Ministry portion as a deductible expense. Here are some quick Dos and Don’ts about claiming a Cell Phone Deduction. Do keep a good record of what…

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Reporting taxable perks for pastors – Q&A

Question: Our pastors are allowed to charge their gym memberships on the church credit card. Is there a specific box on the W-2 where this is reported? Answer: No. The full fair market value of gym memberships is taxable and reportable on the pastor’s W-2s as wages in Box 1. 

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FLSA Changes: Updating Your Policies and Practices

Have you reviewed your policies and practices in light of the upcoming overtime changes? Reclassified employees may have to follow procedures and policies that didn’t apply to them before—or that you didn’t have. Changing habits can be a challenge, but changing those of your formerly exempt employees with respect to hours worked and tracked is…

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I received a Lilly Grant, is it taxable?

The Lilly Endowment Clergy Renewal Program provides an opportunities for pastors to step away briefly from the persistent obligations of daily parish life and to engage in a period of renewal and reflection. This grant is up to $50,000, and all or part of the amount received may be tax-free based on the allocation of these funds: Pulpit Supply – Maximum…

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Saving Money with an HSA

If you’re looking to save some tax dollars and pay for your medical expenses at the same time, a Health Savings Account is one of the best options currently available. One of the reasons that a Health Savings Account is useful is because of how difficult it can be to get a deduction for medical…

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I made a mistake on my 1040 return!

Mistakes can happen on your taxes. Maybe your employer gave you a W-2 that was incorrect. Maybe you forgot to record $500 that you got paid for a wedding last summer. Maybe you accidentally typed 510 as 150 on your notes and underreported income. Regardless of what happened, here are some tips for amending your…

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I missed the 1040 extension deadline, now what?

If you extended your 1040 tax return to October 15th and then missed the extension deadline, you may be concerned about what happens to you. If you are due a refund on the return, there is no penalty for missing the deadline. IRS penalties for late filing and late payment do not apply if you…

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Can a Minister deduct home office expenses and receive a housing allowance?

The answer to this question is no. A 1964 Tax Case (Deason v. Commissioner) stated that any deduction related to tax-exempt income cannot be claimed. Deducting income for clergy housing and then deducting again for a home office at that same location would amount to taking a double deduction, which is not allowed. In general,…

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