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Showing posts from November, 2016

Earned Income Credit for Foreign Missionaries

Question:

A missionary couple (and their children) lives overseas for over half the year, while maintaining a home in the U.S.  Both are US citizens.  Do they qualify for the Earned Income Credit?

Answer:

First, there are three potential credits that could be affected by residency status.
Earned Income Credit (EIC) (refundable) - See IRS Publication 596Child Tax Credit (non-refundable) - Up to $1,000 per qualifying childAdditional Child Tax Credit (refundable) - This credit is for certain individuals who get less than the full amount of the child tax credit. If the taxpayer did not live with his child in the United States for at least six months of the tax year, he cannot claim the EIC.

But a taxpayer may be able to claim the Child Tax Credit or the Additional Child Tax Credit even though he did not live in the United States at least six months of the current tax year.

It is often advantageous for a foreign missionary to claim a Foreign Earned Income Exclusion using Form 2555, thereby exc…

Camp Worker and Overtime

Question:

One of a camp’s fulltime maintenance men is paid $600 per week ($31,200 per year). Some weeks he puts in less than 40 hours. But during camping season, he easily works 60 to 70 hours a week. Is the camp required to pay him overtime?

Answer:

As a general rule, the camp is not required to pay overtime if the employee meets two requirements.
The employee meets the salary test and is paid on a salary basis of at least $913 per week (or $47,476 per year),* and The employee meets the duties test of the executive, administrative, professional, or other exemption.** Because the maintenance man is paid $600 per week, he does not meet the salary test (No. 1 above). The camp is then required to do one of two options:
Option A. Increase the employee’s weekly salary, orOption B. Reclassify the employee to a nonexempt employee, which means the employee will be paid on an hourly basis.  Option A is the simplest. The camp can just increase the maintenance man’s weekly salary from $60…

Heath Care Sharing Ministries and the SE Insurance Deduction

Question:

Can payments made to a health care sharing ministry (e.g., Samaritan Ministries, Christian Healthcare Ministries) which are exempt from the Affordable Care Act be deducted from income as a self-employed (SE) insurance deduction?

Answer:

First, to be technical, "health care sharing ministries" (IRS exemption D) provide participants an exception from Shared Responsibility Payments (ACA penalties), but don't connote other tax benefits.

Second, a health care share ministry does not qualify as health insurance. One does not pay what the IRS considers to be premiums, but instead shares the health expenses of others. And according to IRS Pub 535, in order for self-employed individuals to qualify for a SE insurance deductions they must be to pay premiums for qualifying health insurance. 


Form 944 or 941 Filing for Churches

Question:

A new church filed for an employer identification number (EIN) recently. It received notification from the IRS about the EIN, stating that the church must file Form 944 by the following January deadline. The church has no non-ministerial staff members. Since income tax withholding is elective by ministers and none of the pastors has elected to request non-mandatory withholding is the church required to file Form 944 annually?

Also, a quarterly Form 941 (rather than an annual Form 944) is required of some employers. Which IRS form, if any, should be filed?

Answer:

According to IRS Section 1402(c) and 3121(c), ministers are not subject to mandatory income tax withholding. Unless one or more ministerial employees request non-mandatory withholding, church employers with only ministerial employees do not need to file Form 941 or Form 944. The IRS Ministers Audit Technique Guide explains in further detail a minister's treatments for social security, Medicare tax, Federal Insuranc…

Church Remodeling Payments Reported on Form 1099-MISC

Question:

A church remodeled one of its buildings. One of the members coordinated the remodel, and the church paid individuals directly for their labor. According to the Internal Revenue Service's Form 1099-MISC instructions, one of the criteria is: "You made the payment for services in the course of your trade or business."  Since construction and remodeling is not the church's trade or business are the payments to these individuals reportable on Form 1099-MISC?

Answer:
Yes the payments are reportable on Form 1099-MISC. According to Form 1099-MISC instructions entitled "What is nonemployee compensation?
If the following four conditions are met, you must generally report a payment as nonemployee compensation.
You made the payment to someone who is not your employee. You made the payment for services in the course of your trade or business (including government agencies and nonprofit organizations). You made the payment to an individual, partnership, estate, or, in …