A minister who wishes to be exempt from social security/Medicare tax must file a Form 4361 with the IRS for approval. Before your application can be approved, the IRS must verify that you are aware of the grounds for exemption and that you want the exemption on that basis.
When your completed Form 4361 is received, the IRS will mail you a statement that describes the grounds for receiving an exemption under section 1402(e). You must certify that you have read the statement and seek exemption on the grounds listed on the statement. The certification must be made by signing a copy of the statement under penalties of perjury and mailing it to the IRS not later than 90 days after the date the statement was mailed to you. If it is not mailed by that time, your exemption will not be effective until the date the signed copy is received by the IRS. So it is extremely important to complete this last step, or you will not be exempt. Once the IRS approves it, you will receive a copy marked approved.
The grounds for opting out are not economic or non-religious, but are based on opposition to the acceptance of public insurance with respect to services performed as a minister. It should be noted that the opting out only applies to ministerial earnings. A minister is not being inconsistent in accepting SS or Medicare benefits from non-ministerial earnings.
Bitcoin… Most likely you have heard of it. Maybe you have an idea about what it is. But what if a member of your church asks you, as Pastor or Treasurer, if they can contribute bitcoin to the church. How do you reply? Can it even be done? Most smaller churches are not set up to receive donations of stocks or other securities, much less something as new as bitcoin. Obviously, one does not want to turn away a legitimate contribution with no strings attached, but what is the process? To get the big question out of the way, yes, your church can accept bitcoin contributions, but it is not as simple as a member dropping a check in the offering plate or making an online contribution with a credit card. The church must be prepared to receive such contributions.
But let’s take a step back and look at what bitcoin is. Bitcoin is the most well-known virtual currency now in existence. It is sometimes referred to as cryptocurrency. It not the province of any government, but is a virtual currency used in commerce. Since it is essentially a “private” currency the value of bitcoin changes much as the value of stocks or other securities change value. In fact, the IRS does not recognize bitcoin as cash for purposes of charitable contributions. Therefore, it must be treated as a noncash gift similar to the handling of contributions of other securities. Consequently, the church should not assign a value to the contribution but simply issue a letter acknowledging the contribution.
I received a mailing from an American automobile company regarding the Section 179 deduction. The letter expressed some urgency to purchase a vehicle before the end of the year to get a large Section 179 deduction. While this is true, the letter left me with the impression that I needed to take action before December 31, 2016, or the deduction would be lost. What they stated was true. However, it is what was left unstated that concerns me.
For the uninitiated, Section 179 allows a business taxpayer to expense in the current year costs of certain equipment purchased during the year rather than taking depreciation over the life of the asset. Currently businesses purchasing less than $2,000,000 in such assets may expense up to $500,000 of Section 179 deduction on their return. This amount was enacted in January 2016 and is permanent until Congress changes it. Thus, the deduction remains at $500,000 and is indexed for inflation for future years. The deduction must be taken in the year in which the asset is placed into service.
An unincorporated organization with two or more members is generally classified as a partnership for federal tax purposes if its members carry on a trade, business, financial operation, or venture and divide its profits. However, a joint undertaking merely to share expenses is not a partnership. For example, co-ownership of property maintained and rented or leased is not a partnership unless the co-owners provide services to the tenants.
The rules you must use to determine whether an organization is classified as a partnership changed for organizations formed after 1996.
So you get all your tax information together early and go to your preparer so you can file your tax return early and get the refund quickly. Not so fast. Certain refunds will be delayed and will not be released by the IRS until February 15. This is due to a provision in the PATH Act, enacted by Congress in 2015, prohibiting the IRS from releasing certain refunds prior to February 15. This provision takes effect this year. Note that the 15th is the release date, so it will take a few more days for you to receive the refund. Read More
The minister’s housing allowance has been challenged in court. There have been several challenges in recent years, but last month, Judge Barbara Crabb once again ruled the housing allowance as unconstitutional, favoring a religious group. As of now, it is anticipated that the order will be stayed, meaning it will not be enforced, pending appeals. Once the appeals are exhausted, the order would take effect. Obviously, this would take at least a couple of years. Read More
Much has recently been said of the tax breaks received by the National Football League. While they do receive certain tax breaks, many of these breaks are also available to other businesses. Granted, they do tend to be on a larger scale.
There is however, one area in which sports franchises do get significant tax breaks. Below are three aspects to tax breaks received by the NFL and other professional sports:
- Tax-exempt status of the league office
- Amortization of the purchase price of the franchise
- State and local financing of sports stadiums.
In a 2013 count case in Wisconsin the Freedom From Religion Foundation (FFRF) challenged the Minister’s housing allowance, claiming it provided an unconstitutional subsidy of religion. They won that case, but it was overturned on appeal. The reason for overturning it was that the appeals court indicated that the FFRF did not have standing (or reason to sue) as they had not been damaged by the housing allowance law. The FFRF took it to heart and certain leaders in FFRF paid themselves a housing allowance and excluded it from tax on their individual 1040’s. The IRS disallowed some of them. This led to a new suit, heard by the same Wisconsin judge who made the 2013 ruling. Once again, she ruled the housing allowance unconstitutional.
At long last, Congress and President Trump have given us a tax bill that provides some real relief for taxpayers impacted by this year’s hurricanes. The “Disaster Relief and Airport and Airport Extension Act of 2017” was signed by the President on September 29.
Although it deals with issues beyond hurricane relief, those issues are not the focus of this article and will not be discussed here. And there are some provisions relating to hurricane disaster losses that do not have widespread application and will not be discussed here.
There are four important segments to the hurricane relief granted by this act.
If they carefully follow the guidelines, employers may give cash payments to employees for disaster relief, tax-free. Under Sec. 139 of the Internal Revenue Code, qualified disaster relief payments to employees are tax free to the employee and deductible by the employer. This includes income as well as social security and Medicare taxes. Read More
Certain tax items are adjusted annually for inflation each year. The numbers that follow are not official releases by the IRS, but reflect the probable amounts that will be in effect for tax year 2018, based on the formulas used by the IRS.
The standard deduction for couples filing a joint return is anticipated to increase to $13,000, an increase of $300 from 2017. Single and married filing separately is half that amount. Head of Household will be $9,550, a $200 increase. Taxpayers 65 years or older or blind will get an additional $1,300 standard deduction, a $50 increase. Personal and dependency exemptions will be the same as for 2017, $1,050. These increases will result in an increase in the minimum income requiring taxpayers to file a return.