Summertime Fiscal Year Transitions
Summertime Fiscal Year Transitions Happy New Year in the summer? For some churches and other nonprofit organizations, this is a sensible statement. Most nonprofit organizations decide to follow the calendar year as their tax year (or “fiscal year”) when they are formed. Upon incorporation, some states require disclosure of the month in which the organization’s…
ICHRA Requirements for Reimbursement
ICHRA Requirements for Reimbursement There are no limits to how much a church can offer for reimbursement under ICHRA. This is a big difference from QSEHRA which has rather restrictive limits. With ICHRA, churches can offer as much or as little as they’d like as long as it’s offered fairly to each class. In addition, employers can choose…
2022 meals and entertainment deduction
2022 meals and entertainment deduction As part of the Consolidated Appropriations Act signed into law on December 27, 2020, the deductibility of meals changed. Food and beverages will be 100% deductible if purchased from a restaurant in 2021 and 2022. Here are some examples: Type of Expense Deduction Entertaining clients (sport events, club membership, golf games, etc.) 0%…
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…
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…
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…
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…
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…
Commuting expenses deductible?
Commuting expenses deductible? You cannot deduct the costs of taking a bus, trolley, subway, or taxi or driving a car between your home and your main church or regular place of work. These costs are personal commuting expenses. You cannot deduct commuting expenses no matter how far your home is from your church or regular…
Understanding Clergy W-2 Form
Understanding Clergy W-2 Form By January 31st, an employer must give or mail an employee’s copies to each employee from whom the tax was withheld during the year or wages paid for services. For employees whose employment ends before the end of the year, W-2 Forms can be supplied any time after employment ends, but…