This blog posts answers to questions given to us by ministers and others serving in Christian ministries advancing the gospel of Jesus Christ. It also discusses other financial topics that those in gospel ministries face. We trust the information provided can be helpful to you.
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403(b) Retirement Distributed as Housing Allowance
A pastor recently left his ministry to start a business. While in the ministry, he had a 403(b)* plan which he contributed to for over 12 years. When he retires, are the distributions from this 403(b) eligible for housing allowance, or will the IRS see this as not housing allowance eligible since he is no longer a minister?
The 403(b) plan will be eligible for housing allowance, as long as the church designates it as such. A previous blog post provided some additional information on this issue. Excerpts and a link to the post merit revisiting:
"A retired minister may receive part of his or her pension benefits as a designated parsonage allowance based on past services. Trustees of a minister’s retirement plan may designate a portion of each pension distribution as a parsonage allowance excludible under IRC § 107 (Rev. Rul. 63-156, 1963-2 C.B. 79, and Rev. Rul. 75-22, 1975-1, C.B. 49)" (IRS Minister Audit Technique Guide published in April 2009).
Since it may be a long time between the pastor’s discontinuance of his employment at the church and the time when he receives distributions, he must reestablish contact with its leadership and request a formal housing designation in writing. We generally recommend that the church designate 100% of all future distributions from the 403(b) plan as housing allowance. The minister must then exclude only that portion of the distributions from income for which he has met the three-part test for housing allowance. (See other postings on this blog for a refresher of these rules.)
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 …
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? Answer: In the following answer, we assume that the couple are not employees of the church from whom the gift could not be viewed as compensation for their services. Also, the amount seems to be small enough to avoid any concerns of "private inurement."
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
The U.S. Citizenship and Immigration Services released a revised Form I-9. All new hires after January 21, 2017, must complete the revised Form I-9. All prior released versions of Form I-9 will be invalid for new hires.
Employers are required to have a completed hard copy of Form I-9 on file for each employee. Current employees do not need to re-complete the revised form.