February 02, 2016

Form 1099-MISC for My Pastor? Bad Idea!

Question:

Sue—“I’m planning on issuing my pastor a 1099-MISC for this year and I understand that I can't include Housing Allowance, but what about the retirement that church paid monthly on behalf of my pastor? And the mileage reimbursement we've paid him? Do I have to report all these on 1099?”

Answer:

Sorry, but it’s a bad idea all around. Unless your pastor is an itinerant pastor serving multiple congregations, it’s virtually impossible to classify him as an independent contractor for whom a Form 1099-MISC is prepared. Further, if the church provided him a retirement plan, then that settles it right there. There is no church retirement plan in the Internal Revenue Code for independent contractors. Pastors receive Form W-2. Housing Allowances are noted in the memo box – Box 14. And the retirement plan reporting depends on the type of plan. Mileage reimbursement? it depends on whether it’s an accountable or a non-accountable plan. Sorry to say this, but Sue likely needs professional help.

January 08, 2016

IRS Withdraws Proposed Changes to Donor Written Acknowledgements

**Update to Previous Blog Post: Proposed Change for Donor Written Acknowledgements

Yesterday, January 7, 2016, the IRS withdrew its proposed rulemaking change for donor written acknowledgements. Per REG-138344-13, the IRS received public comments that “expressed significant concerns about donee organizations collecting and maintaining taxpayer identification numbers for purposes of the specific-use information return.”

As a reminder though, nonprofits are still required under IRC Section 170(f)(8) to provide donors a written acknowledgement for any gift over $250. Check out our blog’s other discussions on charitable contributions.

December 30, 2015

MinistryCPA Special Topic: Starting a WI Small Business

The State of Wisconsin launched a One Stop Business Portal to assist individuals in establishing a business in Wisconsin. The portal’s web address is www.openforbusinesswi.com. The portal walks the individual through the following steps.
  1. Entity Registration
  2. Business Tax Registration, which can include a seller’s permit and employee withholding tax number
  3. Unemployment Insurance Assessment

In addition, the website offers an Expanding Your Business page that reviews worker’s compensation requirements.

We have walked many clients through the process of starting a business, and the process can be a bit daunting to the client because of new terms, multiple registration websites, and lots of steps to complete the process. Maybe this Wisconsin portal is the beginning of a one-stop location to learn state requirements and to set up a new business.


December 21, 2015

2016 Standard Mileage Rates

The IRS issued the 2016 standard mileage rates. These rates for the use of a car (also vans, pickups or panel trucks) begin on January 1, 2016.
  • 54 cents per mile for business miles driven, down from 57.5 cents for 2015
  • 19 cents per mile driven for medical or moving purposes, down from 23 cents for 2015
  • 14 cents per mile driven in service of charitable organizations
More information is available on the IRS’s webpage.

December 17, 2015

Office-in-home Deduction for Overseas Missionary

Question:

I am a missionary overseas. I do not have an office at church, but I use a portion of my home as an office. What are the requirements for an Office in Home deduction?

Answer:

A home office qualifies for a deduction if the space is used “exclusively and regularly as your principal place of business” according to IRS Publication 587. In order to fulfill the exclusive use test, the office area must be limited to a separate and recognizable area that is limited only by business use. For example, if your wife and children use a desk in the corner of the living room for homeschooling and you use the same desk for ministry work, the entire living room office space is disqualified from the deduction since you partake in both personal and business use in the area. In order to fulfill the regular use test, the office space must be used on a consistent, regular basis. If the space is used only occasionally, it is disqualified from the deduction.

However, if the desk and additional office furniture, e.g., filing cabinet, is in the corner of your bedroom, and that area is used regularly and exclusively for ministry purposes, that area of your bedroom is deductible as a home office—however small the area truly is!

For further information on qualified home office deductions, refer to our prior blog postings:

Missionary Business Use of Home

“Exclusive Use Test” – Business Us of Home Deduction by a Minister Missionary