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News You (Individuals) Can Use (and that we may use to serve our clients better)

1. Employees get a 2% raise with their first 2011 payroll checks. The Tax Relief Act of 2010 reduces the employee-share of the FICA tax by 2%

2. Provisions set to expire on December 31, 2010, related to sales tax, educator, tuition, contributions, mortgage insurance premiums, and student loan interest deductions, and some related to the Earned Income and Child Tax Credits were extended by the Tax Relief Act. An energy credit for individuals was also reinstated, but at a lower rate.

3. Updated mileage rate deductions for 2011: business-51 cents/mile; charitable-14 cents/mile; moving and medical-19 cents/mile.

4. While it received a lot of negative press, the Health Care Reform Act of 2010 contained provisions that may benefit individuals including tax credits and increased benefits for employees' adult children.

5. The Small Business Jobs Act of 2010 increased some business write-offs and created additional Roth Account conversion opportunities for individuals.

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Housing Allowance and Form 1099-MISC Reporting

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A church provides its minister a housing allowance, but for other purposes it believes that it must report the full amount of compensation (including the non-taxable housing allowance portion) on Form 1099-MISC (in order to demonstrate the full earnings of the minister). If the church reports his compensation,including the housing allowance, on Form 1099-MISC as taxable income, will he be able to deduct his housing expenses somewhere else on the Form 1040?

Answer:

This questions brings up a couple of issues. First, most ministers are properly classified as employees who receive Form W-2, not as independent contractors who receive Form 1099-MISC. On Form W-2, Box 1 for taxable compensation is reduced reflecting the church's designation of a portion of his pay as non-taxable. Then in Box 14, it typically reports as a memorandum item his additional non-taxable, housing allowance compensation. In the situation addressed in the question, this Form W-2 reporting may or may not a…

Review: Form 1099 Payments to 501(c)(3) Organizations

Question:

A church rented space from another church last year. Should it request a completed Form W-9 and issue Form 1099-MISC?

Answer:

We have written similar blog posts on this topic in the past (listed below), but we figured it was a good time for a review. 

Payments from one 501(c)(3) organization to another 501(c)(3) organization are not subject to Form 1099-MISC reporting. The 2015 Instructions for Form 1099-MISC state that "payments to a tax-exempt organization" are exempt from reporting a Form 1099-MISC. 

The following are typical examples of payments of $600 or more by a church which are subject to reporting a Form 1099-MISC:
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Form 1099 for Payments to Other Ministries
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Gifts Paid Out of Church Funds: Form 1099-MISC Requirements

Question:
 A church gave a wedding gift of $1000 to a couple who are church members. No goods or services were provided by the couple in exchange for the gift.  Is a Form 1099-MISC required? 
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Accordingly, no Form 1099-MISC is required. According to the 2017 IRS Instructions for Form 1099-MISC a Form 1099-MISC is only required for payment of goods or services. The requirements are as follows:
"File Form 1099-MISC, Miscellaneous Income, for each person to whom you have paid during the year:  At least $10 in royalties (see the instructions for box 2) or broker payments in lieu of dividends or tax-exempt interest (see the instructions for box 8);  At least $600 in:  1. Rents (box 1);  2. Services performed by someone who is not your …