This blog posts answers to questions given to us by ministers and others serving in Christian ministries advancing the gospel of Jesus Christ. It also discusses other financial topics that those in gospel ministries face. We trust the information provided can be helpful to you.
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MinistryCPA Special Topic: When Can I Start Receiving Social Security Benefits?
Question: When can I start to receive Social Security benefits? Answer:
The average individual is eligibleto begin receiving partial Social Security benefits as early as age 62. However, the Social Security Administration (SSA) has defined full retirement age (FRA), the age at which an individual is eligible to receive his or her full benefit, according to the table below:
An individual may also elect to delay collecting benefits to age 70 in order to receive increased benefits. (For the purposes of this blog post, we will consider only an "average" individual; widows, widowers, disabled individuals, and others are subject to different guidelines).
An individual who elects to start receiving benefits between age 62 and FRA may be subject to two separate penalties. First, monthly benefits may be reduced by as much as 30 percent for those who claim at 62. Second, earnings may be subject to an earnings test, and benefits will be reduced by $1 for every $2 earned past the cap set by the SSA ($15,120 in 2013). Once FRA has been reached, the benefit will be increased to make up for reductions in SS benefits due to excess earnings above the threshold. However, the reduction for collecting earlier than FRA will continue for as long as benefits are collected.
An individual who begins to receive benefits at or after FRA will not be subject to the earnings test, and will receive his or her full monthly benefit with no penalties. Additionally, individuals who delay the start of benefits past FRA can earn delayed retirement credits (DRC) of 8% per year up to age 70. Depending on the length of the delay, this strategy can result in a monthly benefit approximately 30% above FRA benefits.
Based on life expectancy and savings other than Social Security, each option will provide advantages for different individuals. Those who start collecting benefits early will receive a reduced monthly benefit, but will enjoy the income much earlier than those who wait until FRA or after. Additionally, the reduction in benefits will continue for the life of the recipient. Those who delay past FRA will receive a higher monthly benefit, despite waiting longer for the income.
One easy method of comparison involves break-even points. Those who begin collecting benefits at FRA provide the "baseline" for comparison of the total benefit amount. An individual who begins collecting benefits at age 62 will break even with that total amount at age 77. Essentially, this means that someone who lives beyond age 77 will receive greater total lifetime benefits if they wait to start collecting benefits until FRA. One who begins collecting at age 70, earning a higher monthly benefit, will break even with the baseline total amount at age 81. (The Adviser's Guide to Social Security, 2nd Edition, by Theodore J. Sarenski, CPA, PFS, CFP, and Elaine Floyd, CFP. AICPA, 2013. Page 21)
These general guidelines provide a framework for decisions about when to begin collecting benefits, but each individual's situation is different. Other factors, such as life expectancy, other sources of income, and tax consequences should be taken into account when deciding on the timing of benefits.
Question: A church rented space from another church last year. Should it request a completed Form W-9 and issue Form 1099-MISC? Answer: Payments from one 501(c)(3) organization to another 501(c)(3) organization are not subject to Form 1099-MISC reporting. The IRS Instructions for Form 1099-MISC state that "payments to a tax-exempt organization" are exempt from reporting a Form 1099-MISC. The following are typical examples of payments of $600 or more by a church which are subject to reporting a Form 1099-MISC: Rent paid to an individual (non-corporation) Payments for services rendered by individuals who are not employees (e.g. janitorial service, facilities, snow removal, guest speakers) Support sent directly to missionaries
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
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