MinistryCPA - Corey A. Pfaffe, CPA, LLC

The IRS lays out very specific and stringent regulations for organizations that offer tuition reduction plans to their employees (e.g., Publications 15B ,  525 , and 970 ). Below is a brief overview of the major guidelines that non-profit organizations should keep in mind when implementing such plans for primary, secondary, and undergraduate higher education. First, qualified tuition reduction plans are not taxable as compensation to the employee. If an organization meets all of the requirements for a qualified plan, this can be an extremely valuable benefit to employees. Second, tuition reduction plans must be received from, and used at, an eligible educational institution. According to Publication 970, "An eligible educational institution is one that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities." Therefore, a homeschool is ineligible. Third,  ...

Question: A church recently began a summer internship program. What guidelines does it need to be aware of when implementing this program? Answer: First, the church should consider fair compensation for any interns. Although many internships are unpaid, the Wall Street Journal in April 2014 covered increased scrutiny of unpaid interns. According to t he Fair Labor Standards Act, unpaid internships should not be for the direct advantage of the employer, should benefit the intern and be educational, and must not displace regular employees. Churches should carefully apply these standards when considering intern compensation. Second, an intern is not typically an ordained or licensed minister, and should not be treated as a dual-status minister. Generally, interns will be subject to the same federal and state  income tax withholding and   FICA withholding and matching rules as normal employees. For more on the dual status of ministers, read this previous blog post . If...