2009 tax preparation ‘tips’ for ministers
    February 15 2010 by Johnny Ross, BSC GuideStone Representative

    As the deadline for 2009 tax returns approaches (April 15, 2010), it is important to review some basic tax information for those persons who are considered “ministers for tax purposes.” First, be sure your filing status is correct. Most ministers have a dual tax status. 

    In almost every case ministers are employees for federal and state taxes; therefore, they should receive a W-2 from the employing church, not a 1099. In addition, ministers are always self-employed for social security and medicare purposes for ministerial income; therefore, they pay the full SECA tax of 15.3 percent. The church should not withhold and send in Social Security taxes to the Internal Revenue Service.

    Secondly, the employing church should always count business expense allowances as taxable income. For example, a car allowance, book/tape/periodical allowance, convention/workshop allowance, etc. are reported in Box 1 of the W-2 as taxable income.

    It is only when the church has established and administers an accountable business expense reimbursement arrangement that these monies have no taxable consequence. Otherwise that money is taxable.

    If any of the business expense funds are given as salary to the minister, even in an accountable plan, then all of those reimbursements become taxable. The standard mileage reimbursement rate for 2009 was 55 cents per mile. That amount has decreased to 50 cents per mile in 2010.

    Third, be sure to claim the legal amount for housing allowance. The law states that the minister must claim the least of the following as the housing allowance for the year:
    • the amount designated in advance (this may never be done retroactively) as a housing allowance by the church;
    • the amount actually spent for housing costs during the year;
    • or the fair rental value of the home furnished with utilities.
    For those who live in a parsonage and have housing expenses the person must claim the lesser of the following:
    • the amount designated in advance by the church;
    • or the amount actually spent for housing costs during the year.
    Furthermore, these amounts are only exempt from federal/state taxes; the minister must pay SECA taxes on the housing allowance and/or the fair rental value of the parsonage.

    Fourth, be sure to gather and organize all tax documents including receipts for appropriate and correct reporting purposes as you prepare your tax returns or pay an official tax preparer. Be advised in securing a tax preparer that the person whom you enlist understands ministers’ taxes since minister tax status is very different from the ordinary citizen/tax payer.

    Fifth, be sure to include your social security number, sign and date your returns, and mail them to the appropriate Internal Revenue Service address by the tax deadline. The IRS has indicated that these are very common mistakes/oversights.

    For additional information and a step-by-step explanation of preparing your 2009 tax returns an excellent resource piece by Richard Hammar, 2009 Ministers Tax Guide, is now posted on the GuideStone Financial Resources web site.  
    2/15/2010 6:02:00 AM by Johnny Ross, BSC GuideStone Representative | with 0 comments

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