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Mistakenly classifying an employee as an Independent Contractor can result in significant fines and penalties. The Internal Revenue Service (IRS) uses twenty factors to determine whether or not an employer has enough control over a worker in order for that individual to be classified as an employee. Designed only as a guideline, this checklist can help determine whether you possess enough control to demonstrate an employer-employee relationship:

☐ 1. Profit or loss. Can the worker make a profit or suffer a loss as a result of the work, aside from the money earned from the project? (This should involve real economic risk-not just the risk of not getting paid.)

☐ 2. Investment. Does the worker have an investment in the equipment and facilities used to do the work? (The greater the investment, the more likely Independent Contractor status.)

☐ 3. Works for more than one firm. Does the person work for more than one company at a time? (This tends to indicate Independent Contractor status, but is not conclusive since employees can also work for more than one employer.)

☐ 4. Services offered to the general public. Does the worker offer services to the general public?

☐ 5. Instructions. Do you have the right to give the worker instructions about when, where and how to work? (This shows control over the worker.)

☐ 6. Training. Do you train the worker to do the job in a particular way? (Independent Contractors are already trained.)

☐ 7. Integration. Are the worker’s services so important to your business that they have become a necessary part of the business? (This may show that the worker is subject to your control.)

☐ 8. Services rendered personally. Must the worker provide the services personally, as opposed to delegating tasks to someone else? (This indicates that you are interested in the methods employed, and not just the results.)

☐ 9. Hiring assistants. Do you hire, supervise, and pay the worker’s assistants? (Independent Contractors hire and pay their own staff.)

☐ 10. Continuing relationship. Is there an ongoing relationship between the worker and yourself? (A relationship can be considered ongoing if services are performed frequently, but irregularly.)

☐ 11. Work hours. Do you set the worker’s hours? (Independent Contractors are masters of their own time.)

☐ 12. Full-time work. Must the worker spend all of their time on your job? (Independent Contractors choose when and where they will work.)

☐ 13. Work done on premises. Must the individual work on your premises, or do you control the route or location where the work must be performed? (Answering no doesn’t by itself mean Independent Contractor status.)

☐ 14. Sequence. Do you have the right to determine the order in which services are performed? (This shows control over the worker.)

☐ 15. Reports. Must the worker give you reports accounting for their actions? (This may show lack of independence.)

☐ 16. Pay Schedules. Do you pay the worker by hour, week, or month? (Independent Contractors are generally paid by the job or commission, although by industry practice, some are paid by the hour.)

☐ 17. Expenses. Do you pay the worker’s business or travel costs? (This tends to show control.)

☐ 18. Tools and materials. Do you provide the worker with equipment, tools or materials? (Independent Contractors generally supply the materials for the job and use their own tools and equipment.)

☐ 19. Right to fire. Can you terminate the worker? (An Independent Contractor cannot be fired without subjecting you to the risk of breach of contract lawsuit.)

☐ 20. Worker’s right to quit. Can the worker quit at any time, without incurring liability? (An Independent Contractor has a legal obligation to complete the contract.)

If you answer “yes” to all of the first four questions, you are likely dealing with an Independent Contractor. Answering “yes” to any question from numbers 5 through 20 means the worker more likely should be classified as your employee.

Note: The IRS recognizes that the importance of each factor depends on individual circumstances.

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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.

Legal Disclaimer: This document is intended for informational purposes only, and does not constitute legal information or advice. This information and all Church HR Support Center materials are provided in consultation with federal and state statutes and do not encompass other regulations that may exist, such as local ordinances. Transmission of documents or information through the Church HR Support Center does not create an attorney-client relationship. If you are seeking legal advice, you are encouraged to consult an attorney.

HR Q & A:

Q: We don’t typically do background checks, but we’re hiring a new position who will have access to sensitive information. We want to do a background check for this position, but since we’ve never done one for anyone else, we’re worried it would look discriminatory.

A: You may conduct background checks for some jobs but not others. Different jobs may require different levels of investigation, but for the same job title, make sure you keep your process uniform to avoid charges of discrimination.

As long as you are consistently background screening similarly situated job types, selective background checks are acceptable. For example, if you have decided that you will conduct background checks for this HR role because the employee will have access to financial information, payroll data, and employee social security numbers, you should, going forward, also conduct background checks for other positions with similar access.

We recommend limiting what information obtained in a background check you use in employment decisions. In your situation, it would be logical to consider information obtained from a background check concerning an HR applicant’s conviction for identity theft or falsification of records, but probably not about a DUI or trespassing conviction.

In addition, if you decide to do background checks, there are state and federal laws governing when and how it should be done. If you decide to conduct a background check for this position, please let us know. We can walk you through the process with state and federal laws in mind.

Learn more about our HR Services

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.

The Internal Revenue Service (IRS) and Department of Labor (DOL) issued guidance (DOL technical release 2013-03 and IRS Notice 2013-54) that may impact how your church funds medical coverage for some employees. The guidance states that, effective July 1, 2015, organizations may no longer directly pay premiums for an individual health insurance policy [a health insurance policy for an individual or family purchased directly from an insurance company (an “issuer”) or through the Affordable Care Act’s Marketplaces (also called exchanges)] for an employee, nor reimburse an employee who purchases an individual health insurance policy with dollars that are excluded from the employee’s taxable income. These arrangements are sometimes called “Employer Payment Plans” [EPPs] or stand-alone health reimbursement arrangements (HRAs).

Although non-taxed Employer Payments Plans and stand-alone HRAs are no longer permitted, an employer can create an Employer Payment Plan to directly pay the premium for an individual health insurance policy covering the employee—if the employer payments are considered taxable income (i.e., if the employee is taxed on the payments) and the arrangement satisfies a few other requirements:

1. No contributions are made by the employer, i.e., the payment is part of the employee’s taxable salary that is being forwarded by the employer to the insurance issuer.
2. Participation in the program is completely voluntary for employees.
3. The employer collects premiums through payroll deduction and remits them to the insurer without endorsing the program.
4. The employer receives no consideration (e.g., cash) other than reasonable compensation for administrative services rendered to collect the premiums.

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.

Question: One of our employees has asked for an accommodation. Her desk currently faces a wall, and she has asked to move, claiming that for medical reasons she needs to be able to see at a farther distance whenever she looks up. Is it appropriate to ask for medical documentation before considering her request?

HR Answer: If the employee has a disability (a physical or mental impairment that substantially limits a major life activity), you must consider an accommodation for the employee. At present, however, you do not have enough information to know whether her condition qualifies as a disability. So, yes, a request for medical documentation would be appropriate.

Explain to the employee that you are willing to consider the workplace accommodation if her treating physician completes and returns an ADA Medical Inquiry Form. This form, which we have available for you in the HR Support Center, substantiates an employee’s impairment and need for accommodation. Tell the employee that having her doctor complete the form is completely optional, but that the company needs a completed form in order to consider a workplace accommodation. We recommend giving the employee at least two weeks to return the form.

If the employee returns the form, the next step would be to discuss with her what reasonable accommodations (such as moving her desk) could be made without putting an undue burden on the company. If you get to this step, just let us know and we’d be happy to give you some tips and strategies for evaluating accommodations.

Learn more about our HR Services

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.

After tax season ends, we all breathe a sigh of relief. We’re done with the annual tedious task of filing our taxes. For some people, though, the relief is short-lived, and ends when they receive a notice from the IRS. If you are one of the millions of people that receives a notice, step one is to KEEP CALM! Then, follow these steps:

1. Don’t throw it away or otherwise ignore it. In most cases, you will be able to respond quickly and easily to the notice.

2. A notice usually deals with a specific issue about your tax return or account. It may ask you for more information, or notify you of a corrected error.

3. Read the notice carefully – it will have instructions about what you need to do.

4. If the notice is regarding a correction the IRS made, review the information that was corrected. If you agree, you don’t need to reply unless a payment is due. If you do not agree, you must respond to the IRS. You should write a letter that explains why you don’t agree, and include any documents you want the IRS to consider. You will also need to include the bottom tear-off portion of the notice with your letter. Then, mail your letter to the IRS at the address on the bottom of your notice. It usually takes about 30 days for a response from the IRS.

5. Most notices will not require calling or visiting the IRS. However, there is a phone number on the notice if you have questions. If you do call, be sure you have your tax return copy and notice with you.

6. Make and keep a copy of any notices you receive from the IRS.

7. Remember, the IRS will NEVER call or email you as a first contact. The IRS always contacts you first by mail. If you receive a phone call or email that you feel is a scam, contact the IRS immediately.

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

When hiring new employees, you might find the process of collecting new hire information time consuming and tedious. To ensure a pleasant experience by all parties, it’s a good idea to keep a template of forms—in either an electronic format or a hard copy packet.

The packet should contain all forms required to keep on file, along with those that contain benefit information and direct deposit information for each employee.

Here’s a list of forms that should be kept in employee files:
• W-4—Withholding Allowance Certificate
• I9—Employment Eligibility Verification
• State Specific Employee Withholding Form—Note that the form name will vary depending on the state
• Employee benefits forms—Health/dental insurance, 401(k), health savings account, etc
• Direct Deposit
• Basic employee information form—Including salary/hourly wage information

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

A well-written handbook provides employees with a clear understanding of their responsibilities. The handbook also serves as a compass for the organization’s policies and procedures. For example, it advises employees what the procedures are for requesting time off or a vacation. It advises employees whom they should contact when they have an unscheduled absence (and what the timing should be). It tells employees whom to go to if they have questions about any of the specific policies in the handbook. The handbook also communicates an employee’s general responsibilities regarding safety, timekeeping, reporting, and so on. By providing this clear, accessible information, handbooks ensure companies continue moving in the right direction.

Learn more about our HR Services

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.

A significant portion of clergy audits include Schedule C and Form 2016. The Schedule C is a one-page tax schedule used by self-employed to report their business income and expenses on their personal federal income tax return. Form 2016 would report ministry related expenses as an employee of the church.

The good news is that according to the IRS’ latest statistics, approximately 75 percent of all personal income tax returns selected for audit are conducted through “correspondence” with the taxpayer. For self-employed business owners, these correspondence audits are usually narrow in scope and limited to providing information on specified types of income or expenses.

IRS correspondence audit could include Schedule C and Form 2106. This audit would request business and ministry vehicle mileage logs, or perhaps supporting documents used to substantiate business travel and/or entertainment expenses and other ministry related expense. The key point to realize in a correspondence audit is that the IRS typically focuses on documentation types of requests and does not inquire into technical tax law authorities, which govern the treatment of income and expense events.

The bad news is that the remaining 25 percent of IRS personal income tax audits fall into the more extensive “field” audit category. Field audits involve situations where the IRS comes to the taxpayer’s home, place of business or other designated location for an extended period. The purpose of the audit will be much broader than a correspondence audit and likely require significantly more time, effort and tax expertise.

When clergy become subject to a correspondence or field audit, it is highly recommended that they contact Clergy Financial Resources. While it may not be necessary for the clergy tax professional to conduct all aspects of audit, engaging a tax professional offers numerous advantages, such as the following:

1. Gauging the scope of the audit or, if the scope is unclear, provide the initial contact with the IRS auditor to clarify and possibly influence the scope of the audit.
2. Assisting in quantifying areas of potential tax exposure and, where advisable, become proactive in disclosing errors to avoid the imposition of IRS penalties;
3. Actively asserting reasons why the business owner’s treatment of income and deductions is proper under the law.
4. Identifying areas of missed opportunities where deductions were inadvertently omitted or, in the alternative, capable of being accelerated.
5. Determining whether the IRS auditor’s requests are unreasonable and worthy of being curtailed.

Further, depending on the facts, the IRS may also impose discretionary penalties, the most frequent of which is the 20 percent “negligence” penalty. Although most penalties can be waived if the mistakes are attributable to reasonable causes, consideration should be given to the incremental costs to fight a penalty waiver battle, which could be in excess of the penalty amount itself.

IRS audits are never fun. But if you maintains reasonably accurate records and treats the auditor with professionalism, the pain and disruption can be minimized.

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.

1) Introduces Employees to the Organization’s Culture, Mission, and Values

2) Communicates to Employees What is Expected of Them

3) Educates Employees About What They Can Expect From Management and Leadership

4) Helps Ensure Key Church Policies are Clearly and Consistently Communicated

5) Showcases the Benefits the Organization Offers

6) Ensures Compliance with Federal and State Laws

7) Helps Defend Against Employee Claims

8) Lets Employees Know Where to Turn for Help

Enroll in the Church HR Support Center for a customized church employee handbook.

 

IRS Clarifies Individual Health Plan Premium Reimbursements

The IRS recently issued a notice that provides transitional relief to churches who provide reimbursements for their employees to purchase individual health insurance.
Prior to this latest guidance, any reimbursed premiums and other medical reimbursement arrangements would be included as taxable income in 2014. As with all things IRS-related, the rules surrounding health care reform can get a little complicated. The Internal Revenue Service has now issued new guidance that provides ACA relief which is highlighted below. Churches will need to conduct a review as and stop any individual premium reimbursements by June 30, 2015.

·         Employers can reimburse premiums pre-tax through June 30, 2015.
·         By June 30, 2015, employers must stop paying for or reimbursing individual health insurance unless they have just one employee. After that date, ACA penalties will be incurred.
·         If employers have only one employee, they can continue reimbursing healthcare premiums on a pre-tax basis.
·         Employers who have more than one employee and are not in a bona fide group plan, but want to continue to help pay insurance costs, need to change the way this is done after June 30, 2015, to avoid penalties. The way to do this is to increase salaries to cover the health care premiums without stipulating the salary increase for that use.
·         Employers should consider amending their 2014 payroll reports and W-2s to treat the premiums as non-taxable. 

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.