July 31, 2008

Books for Financially Troubled Christians

Looking for a good resource to help a fellow believer rechart his or her financial course? Need some guidance yourself?

This summer, I read what appears to me to be each of three ministries' best single book resource for Christians' personal financial management. Here's the author, title, and website link to each along with my brief assessment of its strengths and weaknesses or best applications (in alphabetical order by author):

Ron Blue, Master Your Money (2004), http://www.ronblue.com/
Blue’s Financial Planning Process offers steps to rise from one’s current status to achieve long-term goals. It's a comprehensive, biblically based plan for Christians at all financial levels. Some may find its terms and detailed schedules overwhelming. He doesn't offer as many nuts-and-bolts of balancing one's budget, but, as a CPA, it's probably my favorite of the three. Website: Points to resources available at Amazon.com; personal financial recovery is not its major focus.

Howard Dayton, Your Money Map (2006), http://www.crown.org/
Crown and Larry Burkett's Christian Financial Concepts merged in 2000, three years before cancer took Burkett home. Many were blessed (including the Pfaffe's) by his ministry initiated in 1976. Dayton's Money Map depicts seven Destinations on his "journey to true financial freedom." Before explaining Destination 1 beginning on page 107, the book offers a broad array of topics that present biblical truth on giving, honesty, work ethic and other basics--good material for group Bible study, I believe. The meat for the reader looking to dig out of crisis provides easy-to-read, easy-to-accept, general teaching for the "journey." Ideal target for this book: the believer looking for Bible-rich teaching on personal finance and help to better manage his resources, avoiding the mistakes of his or her past. Website: Resource-rich; opportunities to learn more without breaking out your debit card.

Dave Ramsey, The Total Money Makeover (2007), http://www.daveramsey.com/
Ramsey's book offers an in-your-face challenge to reverse your finanical downward spiral--just what we often need. Yet, through his frequent testimonials by Christians who have been "madeover" he offers encouraging hope to his readers. His book is narrowly and specifically focused on taking what he calls Baby Steps to get out of debt and become financially fit. His motto: "If you live like no one else, later you can live like no one else." It's not a biblical apologetic for doing so, but he does draw his readers' attention to Scriptural applications. I like his approach to dispelling common myths of personal finance. Ideal target for this book: the believer or unbeliever looking for direct, motivating teaching for recovery from near or real financial ruin. Website: Flashy; opportunities to buy more help.

Standard Mileage Rates

...sorry that this is late, but the standard mileage rates changed July 1, 2008...

1/1-6/30/08 rates (the OLD rates)
Business miles--$.505 per mile
Charitable (volunteer) miles--$.14 per mile
Medical & moving miles--$.19 per mile

7/1-12/31/08 rates (the NEW rates)
Business miles--$.585 per mile
Charitable (volunteer) miles--$.14 per mile
Medical & moving miles--$.27 per mile

Source:
http://www.irs.gov/taxpros/article/0,,id=156624,00.html

July 30, 2008

Housing and Economic Recovery Act of 2008

President Bush sign HR 3221 today. I'll share a couple of quick excerpts that may be of interest to ministers who are considering a home purchase or already own a home.

First-time homebuyer credit. A credit against federal income tax equal to 10 percent of the purchase price (maximum credit of $8,000) for first-time homebuyers applies if the taxpayer "had no present ownership interest in a principle residence during the 3-year period" preceding the purchase. The purchase must be on or after April 9, 2008, and before April 1, 2009. Maybe now's the time for more churches to get out of the real estate business and sell their parsonages--something I've often advocated!

Married couples with more than $150,000 of income will lose the credit ratably as their income approaches $170,000, when it's eliminated entirely. On the other end of the income continuum, taxpayers with no tax will not receive a larger refund due to the credit. Apparently, it can only be used against income tax. And there's a recapture of the credit received if the home is resold within 15 years.

Real estate tax deduction for non-itemizers. Unless a pastor and his wife have more than $10,900 of itemized deductions in 2008, they cannot gain a benefit from their contributions, taxes, mortgage interest, and other personal write-offs. Beginning in 2008, they can take up to a $1,000 real estate tax deduction even if they cannot itemize.

More later, I'm sure...

July 26, 2008

Retirement Distributions as Housing Allowance

Question:

Daniel asks the following question that I've abridged:

On February 6 you posted a topic on Minister's retirement distributions designated as Housing allowance. Are you technically referring to a 403(b)9 plan? In such a plan, the Plan Administrator as an agent of a church body actually makes the distributions and I would assume be able to easily make such a designation before issuing a 1099-R. However, what about 403(b)7 or 403(b)1 plans where a custodial account plan sponsor (typically a mutual fund company) handles the distributions? Are retired ministers allowed to "correct" a 1099-R on their 1040s?

Answer:

In cases such as Daniel has addressed, the retired minister reports the full distribution on Line 16a (2007 Form 1040) and the taxable amount after allowable housing allowance on Line 16b. The minister must follow all other requirements of IRS Publication 1828, the Clergy Housing Allowance Clarification Act of 2002, and IRS Regulation Section 1.107-1.

The minister’s congregation or designated appointee(s) must prepare a valid statement designating the distributions as housing allowance.

July 25, 2008

Records Retention

Question:

A church treasurer in Wisconsin writes: "I've often wondered if I need to keep all the receipts on items purchased for the church? Here's an example. An individual purchases items for VBS, they turn in the receipt, and I reimburse them. Do I need to keep those receipts?"

Answer:

You should keep receipts like these for seven years—the statutory limit for most legal actions. In a worst case scenario, you’d be responsible to prove that each disbursement was for legitimate expenses of the ministry.

Many treasurers use a system such as the following:
1. Each paid invoice is clearly marked “PAID” along with its check number and date.
2. During the year, paid invoices are filed alphabetically by vendor or payee name. A church with a large volume of payments may set up 26 folders, each for a letter of the alphabet. If, for example, ABC Supply has a lot of paid receipts, then a 27th folder can be labeled and those documents filed in it, etc. A receipt for VBS items reimbursed to Maggie Petersen should include notation that she was the one being paid and then be filed in the “P” folder for her last name. (Some ministries create a separate form (“voucher”) to be attached to the receipt; the voucher includes bookkeeping account identification, budget authorization signatures and other information).
3. At the end of each fiscal year, the folders documenting payments are placed in a box with the fiscal year and a “Destroy Date” seven years later. The box from seven years earlier can also be discarded at that time.

July 06, 2008

Gifts to Ministers

Question:

If a minister receives a ‘gift’ from another church (not his home church), is it taxable compensation?

Example:

A church gives ‘gifts’ to a minister on his birthday, anniversary etc. Can it be treated as a nontaxable gift if that church writes a letter stating its intention to give?

Answer:

Internal Revenue Code section 102(c) clearly states that gifts given to employees by their employers are taxable compensation. The IRS has consistently applied this provision to self-employed (non-employee) individuals who provide services for an organization as well. Only the facts and circumstances surrounding a gift can determine whether IRC section 102(c) does or does not apply; a letter stating that a payment is a gift will not override the substance of a transaction.

Often churches will support a minister of another congregation that is unable to provide full support to its own minister. Similar to foreign missionaries supported by congregations, the IRS will imply that services were provided in exchange for the compensation. That support is taxable to the minister; a gift to that minister will have the same taxable character as the standard support.

Exception:

If the gift is benevolent in nature, then it will not be taxable since no services were provided for it. If the church has a benevolent fund for emergency needs of others and disburses funds to aid the minister of another church with his medical costs or to help his family recover from a sudden financial loss, then it will not be taxable just as it would not be taxable to a non-employee member of the congregation receiving similar funds. The facts and circumstances of each situation must be weighed to determine whether the "gift" is related to compensation for services or truly related to benevolent activity. A search of court cases related to the taxation of gifts to employees may produce the most fruitful examples to apply to specific situations.