When should the church use Form 1099-NEC?

As another year comes to a close, there are many important things that need to be wrapped up before the end of the year. For your church, your to-do list must include year-end payroll duties.  Beginning with the 2020 tax year, the IRS will require churches to report nonemployee compensation on the new Form 1099-NEC…

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Is a gift of a holiday turkey taxable?

Many Churches and other employers like to give to their employees around the holidays. In most cases these gifts are taxable, but like almost all tax laws there are a few exceptions. According to IRS Publication 525, “If your employer gives you a turkey, ham, or other item of nominal value at Christmas or other…

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FAQ: Why is my taxable income so low? How are taxable wages calculated?

When filling out applications for loans or student aid, a lot of clergy parents are surprised by line 1 of their tax return. Lenders frequently ask “Why are line 1 taxable wages so low?” The answer is usually the same: Clergy have low taxable wages reported on the 1040 return because of the housing allowance….

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What is Honoraria and how do I report it on my taxes?

You may have heard the term “honoraria” refer to weddings, funerals, baptisms, or any number of other activities. But where does the term honoraria actually come from? The dictionary definition of Honoraria is “a payment for a service which custom or propriety forbids a price to be set.” There is usually no expectation or requirement…

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FAQ: If I earn too much, will that put me into the next tax bracket?

A very common question we receive is regarding income and tax brackets. Many people are concerned that if they earn too much money, it will result in a huge increase in taxes from entering the next highest tax bracket. While entering a higher tax bracket increases your tax rate, it is important to note that…

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Clergy Moving Expenses Q&A

This Q&A has been developed to provide general information for churches and clergy who may have questions about the change in federal tax law concerning moving expense payments.  Q: How does the new law change moving expense payments? A: The moving expense exclusion and the individual deduction were both eliminated for tax years 2018 through…

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Guide to Clergy Compensation

Clergy Status is a person who has been granted ecclesiastical authority by an association, denomination, or state through the rite of ordination, commissioning, or licensing. 1. Generally, an ordained minister has a Master of Divinity from an accredited theological school and is recognized through the rite of ordination to preach and teach the gospel, to…

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Are gifts for performing baptisms, weddings or funerals taxable?

Though they may be called “gifts” or “tokens of appreciation”, any money or gifts you receive for performing services like baptisms, weddings or funerals are actually considered taxable income in the eyes of the IRS and should be reported on your tax return. If you don’t want the additional income or tax that results from…

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What goes in my Box 1 Wages?

Clergy W-2 forms can be a little confusing, and almost every Church seems to do them a little bit differently. And even filling them out requires a little bit of tax knowledge about what is and what is not taxable. Box 1 of the W-2 should include everything that you need IRS to consider as…

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Top 10 Clergy W-2 Mistakes

Correctly filing Clergy taxes can be difficult, especially because many W-2 forms already contain errors or omissions. Here are ten common mistakes that are made when issuing Clergy W-2 forms. Forgetting to remove 403(b) contributions from taxable wages. The wages that Clergy defer into their traditional 403(b) retirement accounts should not be taxed. Forgetting to…

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