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Tips on Selecting a Tax Preparer
Choose a person with experience preparing ministers' tax returns.

Let’s assume you’ve decided to have your tax return prepared by a professional. The next step is to find someone who is experienced and competent in the preparation of ministers’ tax returns. Here are some tips to help you find such a person:

  • If possible, stick with a CPA or tax attorney. These professionals have completed a rigorous educational program, passed a difficult qualifying examination, and are subject to a comprehensive body of professional ethics.
How to Prepare W-2s for Church Employees, Including Ministers
Last-minute help for completing these important forms.
How to Prepare W-2s for Church Employees, Including Ministers
Image: freddie marriage / Unsplash

Churches need to report each employee's taxable income and withheld income taxes as well as Social Security and Medicare taxes on Form W-2, and furnish copies B, C, and two of the 2013 Form W-2 to each employee by January 31, 2014. Copy A should be submitted to the Social ...

Q&A: Hosting a Music Group at Church

I'm a pastor of a local church and have some questions about groups and individuals that come to the church to do musical performances. I'd like to know what our requirements are as a church regarding the legal and tax requirements. For example:

  • Is it okay to collect an offering to offset expenses associated with the performance (travel, meals, and so on)?

How Does the Affordable Care Act Affect Churches?
Attorney Frank Sommerville walks churches through the next two years of changes.

Q: What are some provisions of the Affordable Care Act that take effect in 2013 and 2014 that churches should be aware of?

A: Well, the biggest provision that affects 2013 is going to be changing your cafeteria plan limit for medical expenses to $2,500. But the really big problem ...

Gifts of Money to Pastors
If money is collected and distributed by the employing church, it may be taxable income.
Gifts of Money to Pastors
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Some church members give their pastor, or other church employee, a personal gift on special occasions such as a $20 bill enclosed with a birthday card. These personal gifts may be treated as nontaxable gifts by the pastor because they were not distributed by the employing church. ...

Neglecting to "Render Unto Caesar"
Failure to file income tax returns can get new ministers into hot water.

Ministers—especially new ones—often fail to file income tax returns. It's a common problem, because churches are not required to withhold either income taxes or Social Security taxes from the wages of ministers who are performing ministerial services. This occurrence ...

Q&A: Donated Goods and Charitable Statements

I occasionally have a church member who donates something the church needs. The member then gives me a receipt for the item purchased and asks me to put it on their giving statement. Is this allowed?

No, it cannot go on the member's cash contribution receipt because the member ...

Q&A: Our Pastor Died—Can We Financially Help the Spouse?
Be aware of how the IRS views aid to employees' family members.

A pastor passes away. The church wants to give the widow a small amount of monthly income for the remainder of the year. How is this gift treated from a tax standpoint?

It is best to treat this as taxable income in recognition of the pastor's services. Churches cannot make ...

Q&A: Should This Pastor's Car Repair Reimbursement be Taxed?

Q: I need help with a question regarding money requested for our Deaf Church Pastor for car repairs. The Deaf Church Committee voted to reimburse him for the car repairs but since this is not an actual church expense, it seems it should be considered a gift, and therefore taxable ...

Q&A: Which House Qualifies for the Housing Allowance?

Q: I know the recent Driscoll decision means a pastor can't claim two homes for his or her housing allowance. In a situation where a pastor answers a call in one state, but his or her family stays behind to sell the current residence and to allow the kids to finish school, which ...

Q&A: Are Proceeds From the Church Community Center Taxable?
A prime outreach opportunity raises financial, tax considerations.

Q: Our church's new community center includes a gym, and a coffee shop for people to fellowship and drink coffee while watching their younger children on our playground just outside the building. We also host a church basketball league involving other churches. All the fees ...

State Appeals Court: Church Should Pay Property Tax

On the heels of last week's news regarding an Indiana study that showed one in four government leaders favored payments of some type by churches in exchange for their tax-exempt statuses comes this online column by Peter J. Reilly of Forbes.

Reilly recaps a recent Tennessee appellate ...

Are Designated Gifts for Individuals Tax Deductible?

It's a common scenario at local churches across the country: A member faces a significant medical condition, racking up major debt in the process. Others at the church learn of this challenge and wish to help. Can they donate to the church, designate their gifts for that ...

Q&A: Is Form 990 Required for Churches?
Several organizations are exempt from this reporting requirement

Does a small church need to file a 990N? I have not been able to determine if this is now required. In the past, we have not filed 990's as we are a small congregation.

Section 6033 exempts several organizations from the Form 990 reporting requirements, including the following: ...

Q&A: Is a Bonus Allowed for a Worship Song or Book?
Fairly rewarding an employee's work--when that work is owned by the church.

Q: Can we pay a ‘bonus' to a pastor or worship leader for a successful derivative work (i.e. a worship song or a book based on sermons) they created and the church owns?

A: Yes, as long as the overall compensation of the employee is reasonable. A church cannot compensate any ...

Q&A: Is a Love Offering Tax Deductible for the Donor?
Yes—if specific factors are met.
A Minister’s Most Important Tax Break
Summing up the housing allowance exclusion

The most important tax benefit available to ministers who own or rent their home is the housing allowance exclusion.

To the extent the allowance represents compensation for ministerial services, is used to pay housing expenses, and doesn't exceed the fair rental value of ...

Q&A: Are "Love Offerings" for Church Staff Taxable?
How to handle these well-meaning cash gifts.
The No-Stress Audit
Two steps to help ease worry if your tax return is selected for examination.

Most church staffs dread an audit. Disturbing questions surround the experience: Does the IRS distrust us? Will we have to pay more out of our already slim budget? Thankfully, much of this worry is unwarranted. Most church tax returns are accepted as filed. Tax returns the IRS ...

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Church Issues: Same-Sex Marriage and Gender Identity

Church Issues: Same-Sex Marriage and Gender Identity Member access only

Richard Hammar reviews public accommodations laws.
Planning the Pastor’s Retirement Package

Planning the Pastor’s Retirement Package Member access only

Use this guide to develop your pastor's retirement plan for all stages of life.