Can a Minister deduct home office expenses and receive a housing allowance?

The answer to this question is no. A 1964 Tax Case (Deason v. Commissioner) stated that any deduction related to tax-exempt income cannot be claimed. Deducting income for clergy housing and then deducting again for a home office at that same location would amount to taking a double deduction, which is not allowed. In general,…

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October 15th Extension Deadline

The deadline to file your extended 1040 return is approaching fast. Here are some things to keep in mind for last-minute filers: The extension to file is not an extension to pay. If you owe on your tax returns, you may have some penalties and interest if you waited until October to pay. Even if…

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What is the difference between Traditional and Roth retirement plans?

Let’s talk about how you actually put money into the retirement plan. In a traditional retirement plan, money is put into the plan PRE-TAX, before any taxes are deducted. This can reduce your taxable income for the year, but doesn’t mean that you actually avoid the tax on that income. You end up having to…

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What is the difference between a 401k, a 403b, and an IRA?

The world of retirement plans can be a little confusing if you aren’t familiar with the lingo. First, there are employer sponsored plans. In an employer sponsored plan, the employee has money taken out of their paycheck to put into the retirement plan. The employer may also offer to contribute a matching amount. Different types…

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Top Three Clergy W-2 Mistakes

Listing wages or withholdings in Boxes 3 through 6. Clergy are treated like self-employed individuals in regards to Social Security and Medicare taxes. They should not have taxable Social Security or Medicare wages, and they should not have Social Security or Medicare withholdings.  Including the Housing or Parsonage allowance in places that it shouldn’t be….

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No Time Like the Present to Make Amends (to your Tax Returns!)

If you find out that you forgot to report something on your tax return or you get a corrected W-2, it’s not the end of the world. You will probably just have to amend your tax returns to include the correct information. However, there are some very important reasons why you should submit amendments as…

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Church Responsibilities – I-9 Audit

In accordance with federal law, all individuals hired by the church are required to establish and certify their identity and right to work in the United States. Individuals employed in the United States are required to complete Section 1 of the Form I-9 no later than their first day of employment. This may be completed…

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What happens if I overspend my housing allowance?

A very common question in Clergy Tax Preparation is “If I designated X as my housing allowance, and I overspend it, what happens?” Many believe that overspending your housing allowance will result in a penalty or getting into trouble with the Internal Revenue Service. This is not true. Let’s look at a scenario to show…

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What is Honoraria?

The dictionary defines honoraria as “a payment given for professional services that are normally rendered without charge” or “a payment in recognition of acts for which custom or propriety forbids a price to be set”. This would include payments made for things like weddings, baptisms, funerals, pulpit supply or speaking engagements. In most situations, it…

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Payroll Compliance – Form I-9

We receive a lot of questions about the I-9—the form used to verify the identity and employment authorization of all individuals hired for employment in the United States. Here are some of the most common: 1: How Should I-9s Be Stored? Separately. We recommend that you keep all I-9s in either a separate master file or…

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