Skip to main content

Posts

Potential Tax Law Changes Under New Biden Administration

With the change of Administration in Washington, it is likely significant tax law changes will be made in the coming year. The following highlights some of the potential changes in tax law we believe may be made to increase federal tax revenues as well as some potential actions that can be made in anticipation.  Potential targets for tax increases as we see them Increase in tax rates Reduction or elimination of favorable capital gains and qualified dividend tax rates Reduction or elimination of the qualified business income deduction Reduction or elimination of immediate expensing of capital purchases Reduction or elimination of business tax credits Reduction or elimination of retirement savings incentives Caps on deductible compensation of highly compensated employees Strategies in anticipation of these concerns (actions to consider now, while benefits from the current tax law are still in place) Sell assets eligible for favorable capital gains tax rates Acquire investment and busine
Recent posts

Church Management Software Alternatives

Question: Many churches adopted online giving and donor management in the early days of Covid-19. Some churches were forced to make a quick decision, while others have not revisited their donor management tool for some time. What options are available for churches seeking to establish or change their donor management software? Answer: There are many options available, each having its strengths and weaknesses. It is important that the specific needs of the church are considered when deciding which software to use. It is also important that the software is not only selected to meet those needs, but that it also falls reasonably within the church's budget. The church should not be paying for additional features it will not use. A couple of our team members at MinistryCPA serve at their local churches and have become familiar with the  following products. Stephanie and Tim have provided a bri ef listing of those alternatives below, including their features and advantages. ServantKeeper

Protect Your Identity- Use an Identity Protection PIN

Question: What can I do to help protect my myself from identity theft and tax-related fraud? Answer: One way you can protect your identity when filing your tax return is by taking advantage of the IRS's Identity Protection PIN program. The IRS has recently begun expanding the use of Identity Protection (IP) PIN's for those who wish to make use of the program. An IP PIN is a six digit code issued by the IRS and known only to the individual and his or her tax preparer. The PIN is submitted on the individual's tax return to verify their identity. Throughout the last decade IP PIN's have been issued to protect individuals who have suffered from identity related tax fraud. Now, beginning in 2021, the IRS is allowing individuals to request an IP PIN regardless whether they have been a victim of identity theft.  Because of the increasing risk of identity theft, we recommend you consider making use of this additional security measure when filing your taxes. Those who wish to ob

Simple Cafeteria Plan Eligibility Requirements

Question: A church is considering adopting a simple cafeteria plan in order to provide its pastor and other employees a choice between two benefits. What requirements must be met for the church to be eligible to establish a simple cafeteria plan?  Answer: Section 125 Plans, often referred to as Cafeteria plans, allow employers to offer employees certain benefits on a pretax basis. In most cases, participants in a cafeteria plan must be permitted to choose from at least one taxable benefit (i.e. cash) and one qualified nontaxable benefit such as health plans, group term life insurance, and others described in IRS Publication 15-B .  In order to be Section 125 compliant, the employer must retain written documentation of the plan and meet various requirements described in Internal Revenue Code (IRC) Section 125. One common type of Section 125 plan is a Premium-Only Plan (POP). POP's allow employers to withhold and remit each employee's portion of health insurance premiums pre-tax

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

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