How does an inheritance get taxed?

If you recently received an inheritance, you may be wondering if you have any tax obligations. Fortunately, except for very large estates, most people will never have to pay any sort of tax on their inheritance. Estate tax is calculated based on the value of the deceased’s assets at time of death. This is usually…

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What is the Housing Allowance?

The Clergy Housing Allowance is a portion of a Minister’s pay that has been designated to pay housing expenses. It is considered one of the best tax benefits currently available to Clergy because this portion of income can potentially be exempt from income taxes. In order to determine how much of the Clergy Housing Allowance…

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Accountable versus Non-Accountable Plans

If your Church is paying for your ministry-related expenses, it is important to know if you are being paid under an Accountable plan or a Non-Accountable plan. It has a huge impact on your 1040 taxes. Under an Accountable plan, you are reimbursed for expenses. If you go out and buy a $10 book, you…

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I can’t file because they won’t give me a W-2!

Most taxpayers will receive their W-2 forms in January and file their returns, no problem. But what do you do if your employer won’t give you a W-2, or they refuse to correct it? IRS expects you to contact your employer and try to fix it with them, first. Make sure to document your attempts…

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Avoid Classifying Employees as Independent Contractors

Q. Can churches classify paid workers as independent contractors to avoid paying FICA or withholding income taxes from them? A. No. Churches cannot classify paid workers as independent contractors in an effort to save money. They must follow the law. For a non-clergy employee, the church generally must withhold income and FICA (Social Security and…

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Healthcare Penalty going away in 2019

Prior to 2019, if you failed to maintain adequate health insurance coverage, you could be assessed a penalty on your tax return. This penalty was based on your income and could be quite expensive if you went two or months without health care coverage. According to healthcare.gov, starting in 2019 the “Individual Shared Responsibility Penalty”…

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Dos and Don’ts of Cell Phone Deductions

Almost everyone seems to have a cell phone these days. If you own a cell phone and use it for Ministry work, you may be able to claim the Ministry portion as a deductible expense. Here are some quick Dos and Don’ts about claiming a Cell Phone Deduction. Do keep a good record of what…

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Reporting taxable perks for pastors – Q&A

Question: Our pastors are allowed to charge their gym memberships on the church credit card. Is there a specific box on the W-2 where this is reported? Answer: No. The full fair market value of gym memberships is taxable and reportable on the pastor’s W-2s as wages in Box 1. 

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FLSA Changes: Updating Your Policies and Practices

Have you reviewed your policies and practices in light of the upcoming overtime changes? Reclassified employees may have to follow procedures and policies that didn’t apply to them before—or that you didn’t have. Changing habits can be a challenge, but changing those of your formerly exempt employees with respect to hours worked and tracked is…

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I received a Lilly Grant, is it taxable?

The Lilly Endowment Clergy Renewal Program provides an opportunities for pastors to step away briefly from the persistent obligations of daily parish life and to engage in a period of renewal and reflection. This grant is up to $50,000, and all or part of the amount received may be tax-free based on the allocation of these funds: Pulpit Supply Funds used…

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