October 31, 2014

Can You Claim a Housing Allowance for Two Homes?

Question: 

A minister recently accepted a call to a new ministry where he and his family are staying in the church parsonage. 

Meanwhile, the minister's home in the previous location is unsold. The minister is responsible for payments, taxes, and so forth, on the unsold home in the previous location. 
 
Can the minister claim a housing allowance on the unsold home? 

Answer:

The Ministers Audit Techniques Guide states that "A minister can receive a parsonage allowance for only one home." Many ministers own two homes due to the fact that the minister has accepted a position in a different community and has yet to sell his previous home (similar to the question above). 

Not only may a minister receive a housing allowance for only one home, but that home must be the minister's principal residence. A key term to understand here is the phrase "principal residence," which can be defined as the home where an individual is currently residing.  

So, in the situation above, the minister cannot claim a housing allowance on the unsold home. However, it is not a "lost cause" for the minister and his family. If living in a parsonage, the minister is allowed a small designated allowance to cover utilities and other housing expenses. Additionally, the minister must take into consideration the fair rental value of the property when reporting self-employment earnings for sake of the self-employment tax. 

Read about the controversial "Driscoll court ruling" that helped define the current IRS stance concerning a minister being able to receive a parsonage allowance for only one home. 

Also, we wrote a similar blog post concerning this matter on September 18, 2009:
Two residences for Housing Allowance Purposes? 

Health Insurance Marketplace - Exempt Based upon Membership in Health Care Sharing Ministry

Question:

According to HealthCare.gov, some individuals who don't have a qualified health insurance plan may be exempt from making the individual shared responsibility payment. I was reading the list of exemptions, and one of them stated an exemption for a member of a recognized health care sharing ministry.

What is a recognized health care sharing ministry? And what do I have to do in order to qualify for the exemption?

Answer:

A few days ago, we gave an overview of all the exemptions from the fee for not having health coverage. One of the exemptions we mentioned was based upon being a member of a recognized health care sharing ministry.

According to HealthCare.gov, a health care sharing ministry is "an organization whose members share a common set of ethical and religious beliefs and share medical expenses among themselves in accordance with these beliefs." The most common health care sharing ministries are Samaritan Ministries and Christian Healthcare Ministries.

H.R. 3590: U.S. Patient Protection and Affordable Care Act [26 U.S.C. 5000A(d)(2)(B)(ii); p. 128] details the federal definition of a recognized health care sharing ministry. Below is a summary of the characteristics that qualify a health care sharing ministry as being recognized by the federal government:
  • Must be a 501(c)(3) organization
  • Members must share common ethical or religious beliefs
  • Must not discriminate membership based on state of residence or employment
  • Members cannot lose membership due to development of a medical condition
  • Must have existed and been in practice continually since December 31, 1999
  • Must be subject to an annual audit by an independent CPA which must be publicly available upon request 
In order to qualify for this exemption, you have two options:
  1. You can claim this exemption when you fill out your 2014 federal tax return which is due in April 2015.
     

  2. You can follow the instructions on this application form and submit it to the Marketplace (same as HealthCare.gov). The instructions note that after the application form is submitted, you should hear back within 1-2 weeks concerning whether or not you have been granted the exemption. If you get an exemption from the Marketplace, you must keep the letter that the Marketplace sends you with your exemption certificate number (ECN). You will need the ECN when filing your personal federal taxes. 

October 29, 2014

Health Insurance Marketplace - Exempt Based Upon Hardship

Question:

According to HealthCare.gov, some individuals who don't have a qualified health insurance plan may be exempt from making the individual shared responsibility payment. I was reading the list of exemptions from the penalty, and I noticed one of them was called a hardship exemption.

What is meant by hardship? And what do I have to do in order to qualify for the exemption?

Answer:

Yesterday, we gave an overview of all the exemptions from the fee for not having health care coverage. One of the exemptions we mentioned was based on hardship.

Below are just a few of the circumstances that may qualify you for a hardship exemption. If you would like to know all 14 circumstances of hardship that might qualify an individual to be exempt from the fee, you can read the list at HealthCare.gov.
  1. You received a shut-off notice from a utility company
  2. You filed for bankruptcy in the last 6 months
  3. You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member
  4. You recently experienced the death of a close family member
  5. You had medical expenses you couldn't pay in the last 24 months that resulted in substantial debt
  6. Your individual insurance plan was cancelled and you believe other Marketplace plans are unaffordable
  7.  You experienced another hardship obtaining health insurance

In order to qualify for a hardship exemption, you must follow the instructions on this application form and submit it to the Marketplace (same as HealthCare.gov). The instructions note that after the application form is submitted, you should hear back within 1-2 weeks concerning whether or not you have been granted the exemption. 

If you get an exemption from the Marketplace, you must keep the letter that the Marketplace sends you with your exemption certificate number (ECN). You will need the ECN when filing your personal, federal taxes. 

October 28, 2014

MinistryCPA Special Topic: Exemption Overview for the Health Insurance Marketplace

The "shared responsibility payment" started in 2014, which means that every person needs to have health insurance or make a payment (a nice way of saying a fee) on his or her federal income tax return. However, HealthCare.gov lists some exemptions that may allow individuals to avoid making this payment. Below, we have broken down the various exemptions while describing the different ways to apply for them.

Several of the exemptions can be claimed in one of two ways: (1) either when you file your federal tax return for the year or (2) when you apply for the exemption early through an application form. The following exemptions can be claimed by either of the two options previously described:
  1. Exemptions based on coverage being unaffordable
  2. Exemptions for membership in a health care sharing ministry
  3. Exemptions for membership in a federally-recognized tribe
  4. Exemptions for being incarcerated
The following three exemptions can only be claimed in advance through an application form and not when you file your federal tax return:
  1. Exemptions based upon hardship
  2. Exemptions based on eligibility for services through an Indian health care provider
  3. Exemptions for membership in a recognized religious sect whose members object to insurance
The last three exemptions have special situations:
  1. Exemptions based on low income: If your income is low enough and you do not need to file a tax return, you do not need to apply for an exemption.  
  2. Exemptions based on coverage gap: If you have a gap in coverage of less than 3 months, you do not need to apply for an exemption.
  3. Exemptions based upon illegal presence in the U.S.: If you are not lawfully present in the U.S., you do not need to apply for an exemption.
If you do not qualify for these exemptions and if you do not have a qualified health insurance plan, here are the fees you will have to pay on your federal tax return. 


October 23, 2014

Age Limits for IRA Contributions

Question:

Up until what age can I contribute to my Traditional IRA or Roth IRA?

Answer:

As long as all other requirements are met, a person can contribute to his or her Traditional IRA until that person reaches the age of 70.5 years.

Roth IRAs are different in that contributions can be made regardless of age; there is no "age limit." 

Although a lengthy document, IRS Publication 590 is a great resource concerning Individual Retirement Arrangements (IRAs).