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2014 Clergy Housing Guide

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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

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Beginning January 1, 2014, churches must file Form 8822-B to report any of the following changes:
-business mailing address
-your business location
-identity of your responsible party*

The purpose of this form is to streamline communication and update contact information in case the IRS needs to contact your church. When filing the 8822-B form, churches should check the box at the top of the form indicating that they are a tax-exempt organization.

Form 8822-B must be filed within 60 days of the change. If the change in the identity of your responsible party occurred before 2014, and you have not previously notified the IRS of the change, file Form 8822-B before March 1, 2014, reporting only the most recent change.Complete Form 8822-B as appropriate; use applicable boxes 8a through 9b to report any changes to the identity of your responsible party.

Form 8822-B can be found:
http://www.irs.gov/pub/irs-pdf/f8822b.pdf

*Responsible party defined by the IRS. “responsible party” is the person who has a level of control over, or entitlement to, the funds or assets in the entity that, as a practical matter, enables the individual, directly or indirectly, to control, manage, or direct the entity and the disposition of its funds and assets. Typically for a church, the “responsibly party” would be a church treasuer, church business manager, church board finance chair or lead pastor. This is not an all-inclusive list, but it should provide an idea of the roles and responsibilities of who should be named as a “responsible party” in the eyes of the IRS. The “responsible party” is the contact person for the IRS. Any IRS correspondence will be sent to their attention. Under typical circumstances(not including fraud), the “responsible party” is not liable for liabilities or penalties issued by the IRS.

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 Internal Revenue Service defines a hobby as an activity you pursue without expecting to make a taxable profit. Basically, you do it because you like it, regardless of the cost.

But if you demonstrate that you are involved in an activity with the expectation of making money on it, the IRS will consider it a business. As such, you’ll be able to deduct expenses directly from your income. You even can deduct overall business losses in the years you don’t turn a profit.

The IRS uses two tests in determining whether your activity is a business or a hobby. First, the profit test demands that you show you earned money on the activity in three out of five years. If you can’t meet the profit test, you get another chance to convince the IRS that you are running a business by passing the factors-and-circumstance test. Here, the tax agency takes a subjective, individualized look at your pursuit.

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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Almost all clergy use their personal vehicle for ministry purposes. And there’s nothing wrong with that, as long as they keep proper records.

If you are chosen for an audit, you can bet the auditor will take a good look at the vehicle mileage. This is sometimes the red flag that caused the audit. Every year, clients will say, “let’s just take what I put down last year and add some to it”. During an audit, this will not going to fly.

Be sure to write down your mileage at the beginning and ending of the year to establish an accurate accounting of total miles driven. Then, document the ministry mileage throughout the year. The IRS requires a contemporaneous accounting of all deductible ministry mileage.

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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Churches are prohibited from reimbursing employees for the cost of their individual health insurance policies on a nontaxable basis, regardless of whether the coverage is purchased through a Marketplace or directly from a carrier. Any payment for individual health insurance will be taxable income.

Group health insurance premiums for employees paid directly by the church to the insurance company are still allowed on a nontaxable 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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For the most part, any income received in exchange for services rendered is taxable for both federal income and Social Security taxes, regardless of how it was received. The only exceptions are income paid for certain employer-provided benefits and housing allowances. If income comes through a source other than your employing organization, and it is more than $600 from one source in a calendar year, it needs to be reported at year-end on a Form 1099-MISC by the organization that paid it to you.

Any additional income that you received from your church or employer(love gifts/offerings, honoraria etc…) must be reported on your W-2.

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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If you plan to give to charity, consider donating before the year ends. That way you can claim your contribution as an itemized deduction for 2013. This includes donations you charge to a credit card by Dec. 31, even if you don’t pay the bill until 2014. A gift by check also counts for 2013 as long as you mail it in December. Make sure to save your receipts. You must have a written record for all donations of money in order to claim a deduction.

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

Leave a Comment

The Internal Revenue Service today issued the 2014 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

The business, medical, and moving mileage rates are decreasing from the 2013 rates. The charitable rate is remaining the same.

Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 56 cents per mile for business/ministry miles driven
  • 23.5 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

Source:

Internal Revenue Service
www.irs.gov

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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As you’re putting together your Christmas shopping list, be sure to include charitable gifts that could help reduce your tax bill. In addition to the usual dollar donations or household goods and clothing, consider some less traditional ways to give to charities.

Many groups will accept vehicles with some even making arrangements to pick up the jalopies.

Donate stock or mutual funds that you’ve held for more than a year but that no longer fit your investment goals.The charity gets the asset to hold or sell, and your portfolio rebalancing nets you a deduction for the asset’s value at the time of gifting. Even better, you don’t have to worry about capital gains taxes on the appreciation of your gift.

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.