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Can Form 4361 be filed after the deadline?

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
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IRS Relieves Failure to File Tax Penalties

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. 

Inflation Reduction Act for Individuals and Small Businesses

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

July 2022 Change in Mileage Rates

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 .

Top 10: Church Compensation Considerations

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

Good to Great

  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

2022 Standard Mileage Rates

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 .

Top 10: Payroll Compliance Issues

This is another posting in the MinistryCPA Top 10 series:  Understanding payroll can be a difficult task in any business. Knowing how to onboard new employees, pay them, file tax documents, and deal with other benefits is a daunting task. We have created a list of some of the top payroll compliance issues that we see here at MinistryCPA. 1.       Employee vs Independent Contractor Understanding the difference between an employee and an independent contractor is essential to the payroll process. If a person is classified as an employee, then the business is responsible for employment taxes such as social security, Medicare, unemployment, and income tax withholding. If the person is classified as an independent contractor, the business is not responsible for any of these taxes.  There are three factors that help a business determine whether an individual is an employee or an independent contractor. These three factors are the degree of behavioral control, financial control, and t