Housing Allowance
Many ministers are granted a housing allowance as one of their benefits; unfortunately, this can be challenging come tax time. Many pastors believe their housing allowance is completely tax-free, but that’s not the case. A tax professional with church-related experience can walk you through the do’s and don’ts to ensure that your tax returns are compliant.
Accountable Reimburse Plans
Traditionally, when clergy members are granted an accountable plan, they’re reimbursed for any out of pocket expenses. However, the 2018 update to the tax rules has made this more complicated. Now, clergy members cannot claim unreimbursed expenses as a tax deduction. It’s important that churches take this into consideration as they create a pastor’s compensation plan.
Payroll & Social Security
Churches and payroll are often at odds; unfortunately, many churches aren’t well-versed in how to handle their payroll and they run the risk of trouble with the federal government. It can be challenging to negotiate social security and retirement contributions, not to mention health insurance and other benefits. Leaving it in the hands of paid professionals will not only save time, but it will ensure that your church stays on the right side of the law.
Self-Employment
If you’re a clergy member who is not a W-2 employee of the church, your tax situation is automatically more complicated. You need to become familiar with form 4361, the form that exempts ministers and other members of religious orders from paying self-employment tax. Failure to fill out this form will result in a much heftier tax bill than anticipated.
Retirement
Yes, pastors love their jobs, but it’s nice to have the option to retire when the time comes. Churches and members of the clergy can work together with an experienced accountant to ensure that money is set aside for the future. In addition to planning for eventual retirement, an Individual Retirement Account, or IRA, will relieve ministers’ tax burden. An advisor will help ministers take advantage of the tax deduction that’s permitted for contributions to a traditional IRA.
.svg)
Estimated Tax Payments
A tax professional with church experience can help clergy members plan for their inevitable tax bill. In fact, they can help you make estimated payments to ensure that you’re not caught short when tax season rolls around. It’s important to work with tax pros who have experience in tax preparation for pastors so you can be sure that you’re paying the right amount at the right time.
Tax Strategies
Everything Ministers/ Clergy Should Know About Their Housing Allowance
Cassidi Heltcel, CPADECEMBER 12,2019
What is a Housing Allowance? Perhaps one of the least understood tax benefits, a housing allowance (also called a parsonage allowance or rental...
IRS
Churches Payroll Taxes. To Pay or Not to Pay.
Jamie Ward, CPAJULY 10,2019
In our experience as CPAs, we have learned that a lot of churches are not properly managing their payroll taxes. There are churches all over the...
Tax Strategies
5 Money Saving Tax Strategies for Clergy
Cassidi Heltcel, CPAJULY 11,2019
Churches and taxes have a very long history. Although churches haven't paid taxes since the founding of the United States in 1776, they weren't...