Skip to main content

Required Church Filings with IRS

Question:

What IRS "tax" forms are newly organized churches required to file?

Answer:

Here's a quick checklist to answer this question:

Required: Form SS-4 - Application for federal Employer Identification Number (EIN)

Required: Form W-2 (and related W-3) - Annual Wage and Tax Statement

It Depends: Form 941 - Employer’s Quarterly Federal Tax Return. If the pastor is the only employee and he does not elect voluntary federal income tax withholding, then none is required.

Optional: Form 1023 - Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. Churches are automatically income tax exempt, but the Tax Determination Letter issued by the IRS after completion of Form 1023 can be helpful (e.g., to secure a bulk mailing permit with the USPO). Caution! It's 28 pages long and complicated!

Optional, but beneficial: Application for [your State] Sales and Use Tax Certificate of Exempt Status. Many States apparently instruct churches to include a copy of their Tax Determination Letter which is received from the IRS only after filing and acceptance of Form 1023. My State (Wisconsin) does list this letter as required in its instructions for the Certificate, but I've rarely seen a church file Form 1023 and I've never seen a church denied a State sales tax exempt certificate.

Very Rare: Form 990-T - Exempt Organization Business Income Tax Return. This form is for churches to pay income tax on income earned in excess of $1,000 per year that is not related to its tax exempt purpose. It's called Unrelated Business Income Tax (UBIT).

No way: Form 1120 - U.S. Corporation Income Tax Return. While churches are considered corporations, they do not file the corporate income tax return.

Comments

  1. Good information, I will use it! Thank you

    ReplyDelete

Post a Comment

Popular posts from this blog

Qualified Small Employer HRAs

On December 13, 2016, President Obama signed the 21st Century Cures Act, allowing qualified small employers to offer Health Reimbursement Arrangements (HRA) that follow certain terms.

After the Affordable Care Act was passed, the IRS originally determined that an HRA was not a qualified group health plan. The Cures Act overrules this decision. HRAs are again an option for qualifying small employers.

To be eligible, the small employer must have fewer than 50 employees and must not offer a group health plan to any of its employees.

The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) must be subject to the following terms.
No salary reduction contributions may be made (i.e., 100% employer-funded).Employer must receive proof of employee’s minimum essential coverage.Reimbursements must be for qualifying medical expenses.Reimbursements for any year cannot exceed $4,950 (or $10,000 for family coverage), which will be adjusted annually for inflation.Employer must offer the …

Housing Allowance when Bartering for Rent Payments

Question:

If a minister rents his principal residence, but he performs services (mowing the lawn, repairing the roof, etc.) in lieu of rent, can he still qualify the rent amount for a housing allowance tax benefit?

Answer:

Of course, bartering income is taxable. The Internal Revenue Code interprets that above situation as follows: tenant/minister receives taxable income for the fair market value of the services he provides, andtenant/minster pays landlord for renal of residence. The minister in this case reports taxable income for services provided in lieu of rent. It is also likely subject to self-employment tax. He may then claim as qualifying housing allowance expense equal to the amount he "pays" for rent of his personal residence. Essentially, there is no difference than if the minister and his landlord simply traded checks.

See a past MinistryCPA post regarding this topic: http://ministrycpa.blogspot.com/2016/09/services-to-church-in-lieu-of-rent-of.html

Mission Trips Involving Both Charitable and Personal Time

Question:

A church group went on a two-week mission trip, and a few of the members stayed an additional two weeks for personal time. Will the members who stayed the two additional weeks be able to deduct expenses from the trip?

Answer:

IRS Pub 526 covers the topic of Charitable Contributions and, more specifically, travel expenses associated with charitable trips. The publication states that travel expenses will be deductible “if there is no significant element of personal pleasure, recreation, or vacation in the travel.” The publication also states, “The deduction for travel expenses won't be denied simply because you enjoy providing services to the charitable organization. Even if you enjoy the trip, you can take a charitable contribution deduction for your travel expenses if you are on duty in a genuine and substantial sense throughout the trip. However, if you have only nominal duties, or if for significant parts of the trip you don't have any duties, you can't deduct you…