Update Employee Income and Deductions
The first payroll of the year is the perfect time to review and update your employee deductions, such as:
- Life Insurance
- Retirement deductions such as 403(b)
- Other voluntary deductions
You should plan to change retirement deductions based on the new limits for 2021. Limits generally change from year to year. Make sure you become familiar with the new limits and update your employee’s deductions.
Make sure employees are using the new federal Form W-4
The Internal Revenue Service (IRS) released a new federal Form W-4, which went into effect on January 1, 2020. New employees, who began on or after 1/1/20, and existing employees, who wish to adjust their withholding, must use the new Form W-4.
You can download the new Form W-4 from the IRS website.
Important: Employees, who submitted a Form W-4 prior to 2020 and are not updating their withholding, do not have to submit a new form.
Obtain your state’s new W-4 form, (if applicable)
Your state may have updated its W-4 form. Make sure that you’re using the correct form by checking the Internal Revenue Service (IRS) website here: https://www.irs.gov/tax-professionals/government-sites
Form I-9 for Employment Eligibility
As a church, you must document the eligibility of new employees to work in the U.S. The document you must use is Form I-9, Employment Eligibility Verification, which must be completed by each new hire. The new employee must provide documentation of (a) identity and (b) work eligibility.
There are two steps to the I-9 process. First, the employee fills out the form and states what identity and work eligibility documents will be used. Then, you as the church must look at those documents and make sure they are adequate and appropriate. 4
You must keep this form in the employee’s record, but you don’t need to send it to anyone. If an immigration officer comes to your church or wants to inspect your employee documents, the form is your proof that you verified the employee’s work eligibility.
All churches should have an employee handbook or policies and procedures manual. All new employees should receive a copy of this handbook and should sign that they have read and understood it. The employee handbook becomes a legally binding document for both you and your employees. A policy manual given to all employees can help prevent disgruntled employees, unmet expectations, and possible lawsuits.
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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