Employees Versus Independent Contractors
Employees Versus Independent Contractors One of the most common employment mistakes that churches make is misunderstanding the difference between an employee and an independent contractor. Each employee should receive a Form W2 from the church each year. Employees are subject to a wide array of employment laws and tax requirements. On the other hand, each…
Mid-Year – Housing Allowance Review
Mid-Year Review of Housing Allowance Designations Perhaps the most beneficial tax benefit available to a minister is the clergy housing allowance, which allows a minister to exclude permissible housing expenses from taxable income. Now that that the current year is more than half over, it is a good time for churches and their ministers to…
Is a Minister’s Outside Income Taxable?
Is a Minister’s Outside Income Taxable? When a minister’s income is reported on a year-end W2 or 1099, it is straightforward that the income is taxable and must be reported as such. However, it may be less clear to a minister if other forms of income should be reported as taxable. A minister may receive…
Reporting ministry expenses and/or declare a housing allowance for interim positions
How should I report ministry expenses and/or declare a housing allowance for interim positions. This situation presents unique issues, especially for retirees who are receiving a pension. The differences in tax treatment depend on the length of the interim position, and taxpayers are advised to consider them carefully: Interim position of one year or less…
Three key tax provisions that apply to clergy
The three main key tax provisions that apply to clergy: Self-employment tax Clergy are not eligible to have FICA taxes withheld from their church compensation. In lieu of FICA taxes, clergy pay self-employment tax, also known as Self-Employment Contributions Act tax (SECA). Reimbursements from an employer of SECA are taxable as wages. However, even though…
Repay Employee Student Loans up to $5,250 tax-free
Many churches want to assist employees in the challenges that come with the COVID-19 pandemic. Now, the CARES Act provides a temporary opportunity to help repay employee student loans. The Coronavirus Aid Relief and Economic Security Act (the “CARES Act”) provides a way for churches to help repay employee student loans, with tax benefits for the employee….
IRS Releases 2021 Fringe Benefits Guide
The IRS updated Publication 15-B for 2021, the Employer’s Tax Guide to Fringe Benefits. This publication provides an overview of the taxation and exclusion rules applicable to employee benefits such as accident and health benefits, dependent care assistance, providing a car, cell phone, health savings accounts, group term life insurance coverage, etc. In general, fringe…
Vaccination, Return to Work, and Masking FAQ
Q1: Can we bring all employees back to the church office, but make the unvaccinated keep their masks on? In most states, yes.* Currently the CDC suggests that fully vaccinated people do not need to wear masks in most places (some workplaces will be an exception, such as healthcare settings), but that non-fully vaccinated people…
Do you need a cell phone policy?
According to a variety of surveys, close to 80 percent of the churches said that employees couldn’t do their job efficiently without cell phones. Despite being an integral part of daily work, many churches still do not have an effective cell phone reimbursement policy in place. With constant updates and advancements in cell phone technology,…
How should employee files be organized?
We recommend having five separate files for each employee, as outlined below: I-9 file: Keep all Form I-9s in a separate master file or three-ring binder. Medical file: This file should contain everything related to an employee’s medical history, including health insurance enrollment forms. It’s important to separate this file because you cannot legally base…