MinistryCPA - Corey A. Pfaffe, CPA, LLC

Forms 941 and 944 are both used to report payroll expenses and taxes to the IRS. The forms include information such as total wages paid, number of employees, income taxes withheld, group term life insurance, sick pay, tips, Social Security taxes (employer and employee portions), and Medicare taxes (employer and employee portions). These forms report the total liability that the employer owes to the IRS. Both forms have the same purpose, but there are a few differences.  Even though the forms are used for the same purpose, there is one main difference. Form 941 is filed quarterly and is the standard payroll reporting form that employers use. Form 944 is filed annually and can only be filed by employers who have less than $1,000 in payroll tax liabilities.  If your organization... Has employees Has more than $1,000 in Federal Tax liability (Federal income withholdings, Medicare, and Social Security) Has not received permission from the IRS to file Form 944 Then you should file Form 941 q

 The IRS announced on Tuesday, October 18 that several tax provisions would be changed for the 2023 tax year due to the high levels of inflation. The adjustments will be applicable in 2023 and relate to returns filed in 2024. There many changes, but we will cover the changes that apply to the majority of taxpayers.  Adjusted 2023 Tax Brackets Single < $11,000: 10% $11,000 - $44,725: 12% $44,725 - $95,375: 22% $95,375 - $182,100: 24% $182,100 - $231,250: 32% $231,250 - $578,125: 35% > $578,125: 37% Married Filing Jointly   < $22,000: 10% $22,000 - $89,450: 12% $89,450 - $190,750: 22% $190,750 - $364,200: 24% $364,200 - $462,500: 32% $462,500 - $693,750: 35% >$693,750: 37% Standard Deduction Single- $13,850 Married Filing Jointly- $27,700 Head of Household- $20,800 Earned Income Credit The maximum EIC for 2023 will be increased by $495, and appropriate adjustments will be made to all thresholds.  Retirement Account Contributions The maximum contribution limit for retirement a

Question:   Is it possible to opt out of Social Security after the 2-year deadline? Answer:  Unlike other employees, a licensed or ordained minister has the option to opt out of Social Security and Medicare (FICA). If a minister wants to opt out they must file Form 4361 by the tax deadline including extension, in the second year in which they have received ministerial income of $400 or more. This election is final, and the minister cannot opt back into FICA taxes.  At MinistryCPA, we have received questions from ministers who have exceeded the two year deadline and desire to opt-out. There have been several court cases which provide guidance in answering this question. Some have argued that the minister was unaware of the deadline, had mistakenly believed they had filed a timely election, were given incorrect advice by an IRS employee, or their opposition to participate in Social Security and Medicare did not arise until after the 2-year deadline had passed. In each of these cases the

Since the start of Covid-19, there have been several relief and forgiveness programs to help organizations and individuals that have experienced difficulties during the height of the pandemic. One of the relief programs is focused on forgiving penalties for individuals and organizations that did not file their tax returns on time. On August 24, 2022, the IRS extended the penalty relief for many who filed late tax returns. Individuals and organizations that file their 2019 or 2020 returns by September 30, 2022 will not have failure to file penalties assessed on their taxes. Not all individuals and organizations are eligible for the relief. Eligible returns include Forms 1040, 1041, 1120, 1120-S, 1065, 990-PF, and 5471.  Failure to file penalties will be automatically forgiven, and payments already made will be refunded by the IRS. If you have not filed your 2019 or 2020 tax return please contact us for assistance. 

On Tuesday, August 16, 2022, President Joe Biden signed the Inflation Reduction Act into law with many details yet to be determined related to its implementation. The topics in the bill range from green energy incentives to medical costs to electric cars and IRS enforcement. The plethora of topics can make finding pertinent information difficult, so we have selected some of the most important implications for individuals and small businesses.  Increased tax incentives for electric vehicle purchase In recent years the push for more electric vehicles has increased. The Act appears to increase the volume of vehicles eligible for U.S. manufacturers to sell to buyers interested in receiving the current electric vehicle tax credit which may be as much as $7,500. However, it is no longer available to everyone. New restrictions limit the credit based on income level, vehicle price, and USA-based manufacturer.  Solar panel tax incentives A new solar panel installation tax credit includes eligib

Occasionally when there is a notable change in the cost of travel, the IRS will alter the mileage rates for the remainder of the year. With the increases in costs relating to vehicles and travel this year t he IRS has issued new standard mileage rates for the remainder of 2022. These rates begin on July 1, 2022, and apply to the use of a car, van, pickup, or panel truck. 62.5 cents per mile for business miles driven (up from 58.5 cents in the first half of 2022). 22 cents per mile for medical purposes (up from 18 cents in the first half of 2022). 14 cents per mile driven in service of charitable organizations (no change from the first half of 2022). More information is available on the IRS's  website .

This is another posting in the MinistryCPA Top 10 series: Understanding what to offer a pastor as part of his compensation package can be a difficult task. There are a number of different factors to consider. Variables such as compensation, insurance, housing allowance, taxes, and retirement all play into compensation. We have compiled a list of factors that a church should consider when designing a compensation package for the pastor. Every church situation is unique, and each church should analyze what it can actually afford. 1. How does the church determine an appropriate compensation rate? Determining an appropriate compensation level can be a difficult task in a small ministry. There are a few factors that can be used to help determine a fair compensation for the pastor. The first factor that should be taken into consideration is the needs of the pastor. If the church wants a pastor to work full time, then it must consider what he needs to be paid to support himself and his fami

  The following questions and discussion items elicit strategic thinking by those responsible to lead a Christian ministry, especially as they employ strategic planning processes. Jim Collins and his research team identified characteristics of those organizations that transitioned from being “good” to becoming “great.”   Demonstrating Level 5 Leadership Level 5 leaders embody a paradoxical mix of personal humility and professional will. [They] are fanatically driven, infected with an incurable need to produce sustained results. They are resolved to do whatever it takes to make the [organization] great, no matter how big or hard the decisions” (page 39). Item one : What evidence can you offer from your experience at your Christian ministry that you possess or are developing this level of professional will?   Assembling the Right Team of People Before Determining Exactly What It Should Do “Good-to-great leaders began the transformation by first getting the right people on

The IRS has issued 2022 standard mileage rates. These rates begin on January 1, 2022, and apply to the use of a car, van, pickup or panel truck. 58.5 cents per mile for business miles driven (up from 56 cents in 2021). 18 cents per mile for medical purposes (up from 16 cents in 2021). 14 cents per mile driven in service of charitable organizations (no change from 2021). More information is available on the IRS's  website .