MinistryCPA - Corey A. Pfaffe, CPA, LLC

Question: Having just turned 60, I am in the process of planning my retirement, so I would like to get an idea of how much I can expect for Social Security benefits each month. Can I simply apply a percentage to my average monthly wages over my working life to get an estimate? If not, how does the Social Security Administration (SSA) calculate my monthly benefit? Answer: In our last post on Social Security, we discussed calculation of the average indexed monthly earnings (AIME), which is the basis for monthly benefit calculation.The SSA uses the term "primary insurance amount" (PIA) to denote the monthly benefit available to an individual at full retirement age (FRA). PIA is calculated based on two different "bend points" determined by the SSA. Each year, the bend points are adjusted based on the same national average wage index used to index for AIME purposes. Up to the first bend point, retirees receive 90% of their AIME. This provides a first level of signifi...

Question: Having just turned 60, I am in the process of planning my retirement, so I would like to get an idea of how much I can expect for Social Security benefits each month. Can I simply apply a percentage to my average monthly wages over my working life to get an estimate? If not, how does the Social Security Administration calculate my monthly benefit? Answer: Unfortunately, the process is more complicated than that; you can access a monthly benefit projection by creating an account on the SSA website . Benefits are based on Social Security earnings; that is, only earnings that have been subject to Social Security tax are used in the calculation of benefits. Additionally, the SSA uses a number called averaged indexed monthly earnings (AIME). This number is important in that it forms the basis for calculation of monthly benefits.  AIME is calculated based on the 35 highest years of Social Security earnings for an individual. For example, an individual born in 1948 whose e...

Question: Are reimbursements for gifts of a non-religious or benevolent nature allowed under an accountable reimbursement plan for a church? For example, could a pastor who purchases flashlights for the members of a Sunday School class be reimbursed? Answer: Gifts are a normal business expense, and are clearly addressed by IRS Publication 463: "If you give gifts in the course of your trade or business, you can deduct all or part of the cost." As such, they are allowable as expenses to be reimbursed if they satisfy the requirements of that publication. However, according to the publication, "You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year." For more details, see   IRS Publication 463 .

Question: What are the implications of a church using monies from the general fund to sponsor the children of its members to attend a Christian summer camp? Could the church also pay for staff members' children to attend? Answer: Many churches use monies from either the general fund or a designated "Camp Scholarship" fund to help families who do not have the financial resources to send their children to a Christian camp. This benevolence is deductible to the donors and non-taxable to the recipients. Churches must be careful to a void becoming a "conduit" for  re-characterizing  a donor's payment of a personal obligation as a contribution to the benevolent fund. For example, while the church may offer scholarships to send children to a Christian camp, it should not accept a family member's contribution with the designation that it be forwarded to one of his or her own family members. Gifts to staff members are taxable. However, if the church as a ...

Question: A church located next to a football stadium opens its parking lot to fans on Saturdays when the team has a home game. This happens about half a dozen times each year, and the parking lot is manned by volunteer church members. Parking is free, but the volunteers do solicit donations. Does this arrangement affect the church's tax-exempt status? How much control can these volunteers have over the church's use of the donations? Answer: First, this situation will not affect the tax exempt status of the church. Non-ministry related sources of income, although they do not affect the tax exempt status of the church, may be subject to unrelated business income tax (UBIT). According to IRS Pub. 598, churches may be subject to UBIT on " income from a trade or business regularly conducted by an exempt organization and not substantially related to the performance by the organization of its exempt purpose or function, except that the organization uses the profits deriv...