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Showing posts from 2022

4th Quartile—Your Christian Ministry in Your 60s and 70s

  4 th Quartile—Your Christian Ministry  in  Your 60s and 70s By Corey A. Pfaffe, CPA, PhD Principal of MinistryCPA, a Wisconsin-based CPA firm  Psalm 90.10 – “The days of our years are … if by reason of strength … fourscore years.” “Retire early” they say. But you say, “I’m not done yet!” I’m with you on that one and so are a lot of chief executive leaders of Christian ministries (and Christian business owners, as far as that goes). We’ve taken reasonable care of our physical bodies. We’ve been advancing a rewarding cause we feel strongly about. And we want to develop others to continue and multiply what we’ve started—for their own benefit and for the benefit of the constituencies we serve. A man who knew a lot about advancing a cause and developing another to carrying on a vision that had possessed him for 40 years, wrote: “The days of our years are … if by reason of strength … fourscore years.” That’s right, Moses is the psalmist who recorded these words. Of course, his 120 years w

1099-NEC vs 1099-MISC- When should they be used?

In 2020 the IRS changed the types and format of Form 1099. Before 2020, non-employee compensation was reported on box 7 of Form 1099 Misc. When the change took effect, box 7 was changed to a single question and non-employee compensation received its own 1099. In this post, we will explain the different situations in which each 1099 may be used. It will not be a complete list, but it will give some context to the usage of the different forms.   1099-NEC Form 1099-NEC is used when reporting payments made to a freelance or contract worker who is not an employee of the company. Form 1099 does not need to be filed for every contractor, only the ones that were paid $600 or more during the year. Form 1099 also is not needed if the contractor is arranged as a corporation. Since the person is not an employee, the organization does not withhold any taxes from their pay. The form should be filed with the IRS and sent to the individual by January 31st.  To fill out the form the organization should

Top 10: Factors to Consider when Onboarding Church Employees

  This is another posting in the MinistryCPA Top 10 series: When integrating new employees into a church, leaders can become overwhelmed with the onboarding process. In churches, several different factors need to be considered on the first day of work, as well as some information that should be communicated to the employee. We have compiled a list of some of the factors that a church should consider when hiring and onboarding a new employee.   1. Clear communication about job expectations When onboarding new employees it is vital that they understand their responsibilities and learn about the church. Giving the employee a job description can be a great help to them. Having clear information about their job responsibilities as well as clear descriptions of their co-workers' jobs can help the new employee understand who to go to in different situations. For example, a new church bookkeeper may not know if he or she is supposed to collect information for payroll. The pastoral role wou

Form 941 and 944 Overview

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

2023 Tax Adjustments for Inflation

 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

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

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 .