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Consolidated Appropriations Act for Churches and Christian Ministries

  Highlights of Consolidated Appropriations Act (CAA) of 2021 applied to Churches and Christian Ministries February 2021 While the actual CAA is 5,593 pages long, the following summary highlights portions of this latest coronavirus related legislation specifically of interest to churches and Christian ministries. We have listed them in the order that we believe will most impact ministries. We certainly advise readers to consult us for details of these provisions and the myriad other components of the law. With the new Administration in Washington additional legislation is inevitable and may modify these benefits. PPP2 loans and forgiveness A second wave of Paycheck Protection Loans and forgiveness is available for eligible not-for-profit organizations. The primary eligibility criteria requires that at least one 2020 quarter’s gross receipts were at least 25% less than the same quarter in 2019. Similar to PPP1, the loan amount is 2.5 times the average total monthly payment o
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When you don't know what you don't know

Here at MinistryCPA, we recognize that many churches rely on volunteers and/or part-time treasurers and financial secretaries.  With this in mind, we seek to come alongside ministries in providing the much-needed support to ensure that they are operating in a manner that is both compliant with governing authorities and taking advantage of opportunities for improved stewardship of ministry and employer financial resources.  Please consider this brief checklist to determine if your ministry needs to look further into areas that could be classified as “We don’t know if we are compliant.” Please check all compliance requirements that are currently being met: File quarterly Form 941 or annual Form 944 with the IRS Issue Forms W-2 to all employees and File Forms W-2/ W-3 with SSA Ministerial Housing Allowance is only listed in box 14 of the Form W-2 – it is not included in box 1 Obtain Form W-9 from all individuals/businesses that are paid the cumulative total of $600 or more in the year f

2021 Standard Mileage Rates

The IRS has issued 2021 standard mileage rates. These rates begin on January 1, 2021, and apply to the use of a car, van, pickup or panel truck. 56 cents per mile for business miles driven (down from 57.5 cents in 2020). 16 cents per mile for medical purposes (down from 17 cents in 2020). 14 cents per mile driven in service of charitable organizations (no change from 2020). More information is available on the IRS's website .

Determining the Fair Rental Value (FRV) of a Parsonage

Question:  How do I calculate the Fair Rental Value of my home used to determine my Housing Allowance exclusion? Answer: Fair Rental Value (FRV) is important to establish when a minister is provided a parsonage or housing allowance. When a pastor is provided a parsonage, the fair rental value he reports is subject to SECA tax (social security and Medicare). The fair rental value is also a factor in the three part test used to determine how much a pastor can exclude as housing allowance. IRS Publication 517  (Jan 2020) describes that under the three part test, a minister "may exclude from gross income the smallest of 1) the amount actually used to provide a home, 2) the amount officially designated as a housing allowance, or 3) the fair rental value of the home, including furnishings, utilities, garage, etc."  Because fair rental value is needed both when a minister has a parsonage and a housing allowance MinistryCPA often receives questions regarding its calculation. Furtherm

Annual Reminder: Are Gifts to Clergy Taxable or Nontaxable?

Question: Are gifts given to a pastor from church members considered taxable income to him? Answer: To determine if the gifts are taxable to the pastor the following items must be considered.  An important consideration in determining the taxability of gifts is whether they were given through the church or directly from individuals. From the perspective of the IRS, if the church takes corporate action as an employer in collecting and distributing the gifts, then the gifts are taxable to the pastor as an employee of the church (for example, an annual Christmas collection). Also, according a recent court case, if the church regularly solicits members to give through a structured program, this also indicates that the gifts are taxable to the pastor. In Felton v. Commissioner the court determined that a church's solicitation of members to use special blue envelopes to insert cash gifts which were handed directly to the pastor after each collection led to taxable income to the pastor. A

Special Topic: U.S. Olympic Champion Ben Peterson's Autobiography "Road to Gold"

Road to Gold , by Ben Peterson We are privileged to serve our client Ben Peterson and Camp of Champs, the wrestling ministry he founded   and directs. Ben wrestled for more than 16 years, coached on a collegiate level for 28  years, and has directed Camp of Champs for more than 40 years. We have read his autobiography and found Ben's dedication to the sport and his faith to be inspiring. If you are looking for a good story we highly recommend Ben's  Road to Gold. In Road to Gold , Ben shares the lessons he learned throughout his upbringing and how they led him to achieve Olympic victory. Ben states a key element of his youth was the consistency of his parents. He was encouraged to read the Bible every day from an early age, which he now describes as the most stabilizing habit in his life. Throughout his story Ben also emphasizes the importance of confidence, solid goals, hard work, and consistency. These qualities helped Ben throughout his life and wrestling career, from learni

Why record designated gifts to Equity instead of a Liability accounts?

Question:  Why wouldn't a contribution designated to a missionary be recorded as a Liability instead of an Equity Fund account as you suggest? Then when the money is sent to that missionary the entry would simply reduce the Liability account. Answer: Generally Accepted Accounting Principles (GAAP) states that donor designated gifts, including missions funds, are considered donor restricted funds. As restricted funds it is best practice to record designated gifts as equity accounts, which falls under GAAP standards. This is true regardless of whether the restriction is temporary or permanent. Temporarily restricted gifts are gifts given by the donor for a specific purpose or program or for use at a certain time. In a church, common temporarily restricted funds might include a missions fund, benevolence fund, building fund, and others. Permanently restricted contributions are gifts given by the donor to be permanently maintained, but the church may use any income that comes from the

Three QuickBooks Alternatives to Posting Designated Gifts

Question:  What is the best approach to recording the receipt and disbursement of designated gifts in QuickBooks? Answer: There are three ways we recommend tracking receipts and disbursements for designated gifts. Each of these alternatives will come to the same conclusion at year end on the Statement of Financial Position (aka, the "Balance Sheet"), showing the same beginning- and end-of-year balances.      1) The first approach is to post the receipts and disbursements of each designated fund throughout the year to a single equity account. The benefit of this is that you will always have a real-time balance of remaining funds. The total receipts and total disbursements can also be viewed on QuickBooks by creating a "Transactions by Account" report and view the total credits (receipts) and debits (disbursements) of the desired designated fund. An additional benefit is that no year-end closing entries need to be made, as everything is posted directly to the equity a

How to Establish a Written Accountable Reimbursement Plan

Question: Our church would like to set in place an accountable minister's expense reimbursement plan to reimburse our pastor for any professional expenses he incurs. What needs to be done establish an accountable plan? Answer: Under accountable plans, eligible ministry expenses reimbursed to employees are not taxable as income. To establish an accountable plan an employer must follow three rules. For a more extensive discussion of these rules and guidelines see our previous blog post linked below.      1) The expenses must be business related.     2) The expenses must be substantiated in a reasonable period.     3) The employee must return any excess reimbursement or allowance to the employer. Following these rules is enough to establish an accountable plan. However, while there is no requirement to have the plan in writing it may be wise to create a written plan to ensure that the guidelines and rules are followed. A recent article (Feb 2020) in the AICPA's Journal of Acco

Is Education Assistance to a Pastor Considered Taxable Income?

Question: The pastor of a small church is furthering his education while fulfilling his duties as a minister. He wishes to complete a master's degree to improve his knowledge and abilities as a Christian leader. If the church pays the university for its pastor's master's degree, is the benefit taxable income to him?  Answer: There are two options to be considered when answering this question. The IRS provides two avenues in which education benefits provided by the employer may be excluded from taxable income, each with separate requirements. The education assistance may be excluded from income if it qualifies as a working condition fringe benefit or is part of an educational assistance program. 1) Working Condition Fringe Benefit If education benefits meet certain requirements they may qualify as a working condition fringe benefit, and therefore be excluded from income.  IRS Publication 15-B (2020) describes the specific requirements that must be met for job-related educat