What is “Donation Bunching”?
In all the talk about the Tax Cuts and Jobs Act, you may have heard about the terming “bunching donations” being thrown around. What is it? Can it help your tax return? “Donation bunching” is a tax strategy to attempt to maximize your tax deductions. Prior to 2018, it was much easier for taxpayers to…
2018 Webinar for Clergy W-2 Forms
Filing clergy returns can be an intimidating and even confusing process to the uninitiated. Practitioners and bookkeepers unfamiliar with clergy tax law will quickly find that Clergy W-2 forms differ slightly from regular W-2 forms. Often Social Security and Medicare withholding will get reported by mistake when they should not. Sometimes housing allowance or parsonages…
Who Is a Minister?
When a church hires an employee, one of the initial decisions that must be made is whether to treat the worker as clergy, non-clergy employee or contractor. This decision may seem insignificant, but it has huge implications when it comes to payroll. Ministers have what is commonly referred to as “dual tax status.” For federal…
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….
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…
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…
Must Churches File for 501(c)(3) Tax Exemption?
The Internal Revenue Code section 508(c) sets out that churches are automatically recognized as tax-exempt under 501(c)(3), and the IRS does not require churches to apply for tax-exempt status if they meet the following criteria: a distinct legal existence; a recognized creed and form of worship; a definite and distinct ecclesiastical government; a formal code…
Is a Pastor’s Retirement Gift Taxable?
Federal tax law requires all forms of compensation to be reported as taxable income unless specifically excluded by law. Gifts are one such exclusion. The question, then, is whether retirement gifts are taxable compensation for services rendered or tax-free gifts. This answer is not always clear. In a series of cases in the early 1950s,…
Love Offerings: Taxable or Not?
Churches sometimes collect “love offerings” from the congregation for a pastor, visiting minister, volunteer, or staff member in recognition of services rendered. So, if a church takes up a love offering for one of its service providers, is it reportable as income on Form W-2. If the recipient is not a church employee, the income should…
What type of housing expense records should clergy be keeping?
Ideally, clergy should keep careful housing expense records to determine whether expenses are greater or less than the annual designation. Records are also important for estimating a reasonable housing allowance for the next year. Original receipts, invoices, canceled checks, charge card records, etc. are all essential. To simplify record keeping, some pastors find it helpful to have one charge…
