MinistryCPA - Corey A. Pfaffe, CPA, LLC

Here at MinistryCPA we receive a wide variety of questions and come across many unique situations. We recently received a request to cover different topics by briefly describing the top 10 problems or questions raised in each category. We have since developed a list of topics that will be covered in a series of top 10 posts on our blog. We hope that these discussions will be helpful to you. In this post we will be looking at the top 10 bookkeeping mistakes seen by MinistryCPA. 1. Errors in initial software setup When establishing and setting up accounting software such as QuickBooks, it is important that it is done so carefully and properly.  Many of the problems MinistryCPA helps to correct are caused by an error in the initial software setup. It is important to consider what software features are needed for the  organization (payroll, inventory, etc.), what accounting method best suits the organization's operations (cash, accrual, modified cash), and that a strong chart of a...

MinistryCPA has received many inquiries regarding the advance payments of the expanded child tax credit. For 2021, the child tax credit has been increased and made fully refundable. Most individuals with children have likely received correspondence from the IRS indicating their eligibility for the advance payment of these credits which will be sent out each month beginning on July 15. Those who receive the advance payments will claim the second half of the expanded child tax credit on their return. For some families, it may be advantageous to unenroll from receiving the advance payments. Each situation is different, so it may be wise to do some basic tax planning to determine the best course of action. If you are unsure whether to receive these advance payments of the credit now or wait to claim the credit on your 2021 return we recommend unenrolling now. The full credit will be available to you on your 2021 return if you unenroll from these payments. To stop advance payments both you ...

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 a...

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...

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...

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-ta...

  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 payme...

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 t...

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 .

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. Furt...