Starting a Nonprofit Organization: Federal Tax-Exempt Status

Starting a Nonprofit Organization: Federal Tax-Exempt Status Once a non-profit organization has been incorporated with the state, obtained a federal employee identification number, formed a board, and commenced operations, it can apply for tax-exempt status with the federal government. There are two major reasons why a nonprofit may desire tax-exempt status. First, exempt status allows…

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Starting a Nonprofit Organization: State Reports and Filings

Starting a Nonprofit Organization – State Reports and Filings Previous articles in this series have discussed nonprofit start-up tasks of incorporating with the state, obtaining a federal employee identification number, opening bank accounts, and applying for federal tax-exempt status. Beyond these vital tasks of starting a non-profit organization, there may be several additional details to address…

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Can a part-time employee be exempt?

Can a part-time employee be exempt? Yes, a part-time employee may be classified as exempt. The minimum salary and duties requirements must still be met, of course. And the minimum salary cannot be prorated when an exempt employee works part-time. In other words, the federal requirement to pay $684 per week (or the higher state minimum salary) will…

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Remember, estimated tax payment is also due on April 18.

Remember, estimated tax payment is also due on April 18. The first 2022 estimated tax payment for individuals and most other calendar year entities is also due on April 18, 2022. The penalties for late payment of estimated taxes are computed as simple interest, but the interest rate has been increasing. The federal estimated payment…

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What if you don’t have the money to pay the tax?

What if you don’t have the money to pay the tax? The IRS will allow you to file an extension without paying the tax. You are still required to include an estimate of the tax due on the form. (The extension will not be accepted without this amount being entered.) The late filing penalty will…

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Reimbursement Policies

Reimbursement Policies Many religious organizations have made fixed sum monthly payments to their minister or other staff for a “travel or professional allowance” and do not request an accounting for how the money was spent. Allowance plans are always taxable are reported on Form W-2. It is strongly recommended that the congregation establish an Accountable…

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Clergy Housing Allowance

Clergy Housing Allowance Ministers who own their home can not only take advantage of the housing allowance by including mortgage payments as housing expenses but also can deduct mortgage interest and property taxes on their itemized deductions. This is often referred to as a “double deduction. Once ministers pay off their mortgages, however, they can…

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Quarterly Payments Tips

Quarterly Payments Tips In a non-clergy job, the employer withholds an employee’s federal income tax and Social Security tax from every paycheck. But clergy are classified as dual status employees and are exempt from both federal income tax withholding and considered self-employed for Social Security tax purposes. This means a church normally won’t withhold income tax and…

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What Does Clergy Dual Status Mean?

What Does Clergy Dual Status Mean? Under federal law, most ministers have dual tax status. Dual tax status means a minister is an employee of the church for federal income tax purposes, and self-employed for Social Security and Medicare taxes. For ministers, wages are reported in two different ways: Federal Income Tax = Employee status…

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Limitations on the Housing Allowance

Limitations on the Housing Allowance After reading about the Housing or Parsonage / Manse Allowance, you may be thinking, “if I designate my entire salary as a Housing Allowance, would it all be excluded from federal income taxes?” IRS has already addressed this by limiting the Allowance to the least of the following: 1. The…

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