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For many years, churches have been permitted to reimburse employees for or directly pay the cost of individual health insurance policy premiums and exclude such amounts from the employee’s gross income. However, recent Internal Revenue Service guidance effectively eliminates these health care reimbursement plans after December 31, 2013.

Group health insurance policy premiums paid directly by the church to the insurance provider are still allowed on a nontaxable basis. When the church moves from a group to individual policies, any payments to the insurance provider or employees are now considered taxable income to the employee.

A church is still allowed to establish an arrangement under which an employee may choose between cash or an after-tax amount to be applied toward health coverage. The church is just not permitted to provide reimbursement on a pre-tax basis. Some churches have identified a cost savings when moving to individual coverage. However, each employee will have an increase in their tax liability.

NOTE: Churches with only one employee are eligible to set up a standalone HRA to pay for individual health care premiums and miscellaneous medical expenses on a pre-tax basis.

Source:
Clergy Financial Resources

http://www.clergytaxnet.com

Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations.

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Tax and Financial management should be a year-round activity rather than limited to the traditional tax season. The biggest mistake nearly one-third of clergy make is only communicating with their accountants during tax time. In order that we may properly advise you of tax considerations, please keep us informed of any significant changes in your financial affairs or of any correspondence received from taxing authorities.

Source:
Clergy Financial Resources

http://www.clergytaxnet.com

Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations.

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Let’s face it. Running a church often leaves little time to address human resources (HR) or payroll challenges. Only 6% of the churches have a dedicated HR professional on staff, yet making any of these Top 5 HR or Payroll Mistakes can have direct impact on your HR and payroll compliance:

1. Incorrect employment classification
2. No or old employee handbook
3. Improper payroll deductions
4. Missing or incomplete employment records
5. No hiring and terminating letters

Do any of these look familiar?

Whether you’re an existing client who wants to learn more, or are looking for a new HR or payroll service, we’re ready to help your church when you’re ready.

Contact us today!

Source:
Clergy Financial Resources

http://www.clergytaxnet.com

Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations

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Document the Employee is Legally Allowed to Work
This involves verifying both their identity and that they are legal for employment in the United States. Once they have presented you with the necessary documentation to verify this, you can fill out their I-9 form. You needn’t submit this to anyone. However, it is crucial to have this document on file for the authorities, should they ever request to examine it.

Have the Employee Fill Out Tax Forms
The W4 form the IRS will let you know how much to withhold from each of the employee’s paychecks for federal tax purposes. In addition, most states have state income taxes, which will require their own form or forms. The only item you should need to fill out on these forms is your FEIN.

The Department of Labor requires that you have on file for all employees: personal information, compensation, payroll deductions, records of hours worked, records of compensation, W4 and I9 forms.

Source:
Clergy Financial Resources

http://www.clergytaxnet.com

Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations

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The answer is no. The church does not have to provide health insurance to their employees. Churches with less than 50 full-time equivalent employees for the previous calendar year are not required to provide health insurance. However, The Affordable Care Act requires most Americans to carry a “minimum essential coverage” health plan, or pay a tax penalty.

Source:
Clergy Financial Resources

http://www.clergytaxnet.com

Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations

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Outstanding student loans were $1.11 trillion as of 3/31/14. Outstanding credit card debt was $857 billion as of 3/31/14. Student loans have increased $124 billion in the last 12 months while credit card debt has increased just $7 billion over the same period (source: Federal Reserve).

Source:
Clergy Financial Resources

http://www.clergytaxnet.com

Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations

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From 1984 through 2008, the Social Security payroll taxes paid by Americans exceeded the benefit payments made by Social Security. However since 2009, benefits paid have exceeded taxes collected, including a $51 billion shortfall in 2013 (source: Social Security).

Clergy Financial Resources

http://www.clergytaxnet.com

Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations

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More than half (56%) of 1,000 Americans at least age 25 that were surveyed earlier this year have never attempted (nor has their spouse attempted) to calculate how much they will need to accumulate for their eventual retirement (source: Employee Benefit Research Institute).

Clergy Financial Resources

http://www.clergytaxnet.com

Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations

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The frequency of payroll audits has surged over the last five years and churches are facing increased payroll scrutiny. Most payroll audits have traditionally focused on whether or not a church is misclassifying an employee as an independent contractor, thus avoiding Social Security, Medicare and other payroll taxes. Churches misclassify anywhere from 10 percent to more than 60 percent of their workers as independent contractors.

Since 2008, states have been springing into action to audit payroll taxes as a way to increase revenue. The increase in payroll audits has also been intensified by the federal government. The U.S. Department of Labor has issued partnership agreements with California, Connecticut, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington to collaboratively investigate more than 6,000 employers for misclassifying employees. The U.S. Treasury estimates that if all employers were forced to properly classify employees it would result in $8.71 billion in added federal tax revenue over the next decade.

We encourage you to review your classification of employees. A payroll audit can be a very expensive proposition for any church, and the recent increase in government scrutiny regarding the issue has escalated the likelihood of an audit. Contact Clergy Financial Resources to learn more.

Source:
Clergy Financial Resources

http://www.clergytaxnet.com

Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations

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File Form 4361 by the date your income tax return is due, including extensions, for the second tax year in which you have net earnings from self-employment of at least $400. This rule applies if any part of your net earnings for each of the 2 years came from your services. We also suggest to contact the Social Security office to determine the impact to your future benefits.

4361 Form and Instructions

To claim the exemption from SE tax, you must meet all of the following conditions.

• You file Form 4361
• You are conscientiously opposed to public insurance because of your individual religious considerations (not because of your general conscience), or you are opposed because of the principles of your religious denomination.
• You cannot file for economic reasons.
• You establish that the organization that ordained, commissioned, or licensed you, or your religious order, is a tax-exempt religious organization.
• You establish that the organization is a church or a convention or association of churches.

After you receive your approved Form 4361, you need to keep a copy with your important records. It is extremely difficult to get a copy from the IRS if it is lost. Once the exemption is approved, it is irrevocable.

Source:
Clergy Financial Resources

http://www.clergytaxnet.com

Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations