Churches and Ministers Should Be Aware of the Following Deadlines in November and December of 2011
Note: If a date listed below for filing a return or making a tax payment falls on a Saturday, Sunday, or legal holiday (either national or statewide in a state where the return is required to be filed), the return or tax payment is due on the following business day.
• If your church or organization reported withheld taxes of more than $50,000 during the most recent lookback period (for 2011 the lookback period is July 1, 2009, through June 30, 2010), then the withheld payroll taxes are deposited semiweekly with a bank. This means that for paydays falling on Wednesday, Thursday, or Friday, the payroll taxes must be deposited on or by the following Wednesday. For all other paydays, the payroll taxes must be deposited on the Friday following the payday. Note further that large employers having withheld taxes of $100,000 or more at the end of any day must deposit the taxes by the next banking day. The deposit days are based on the timing of the employer's payroll. Withheld taxes include federal income taxes withheld from employee wages, the employee's share of Social Security and Medicare taxes, and the employer's share of Social Security and Medicare taxes.
• If your church or organization reported withheld taxes of $50,000 or less during the most recent lookback period (for 2011 the lookback period is July 1, 2009, through June 30, 2010), then you must deposit payroll taxes monthly. Monthly deposits are due by the 15th day of the following month. Note, however, that if withheld taxes are less than $2,500 at the end of any calendar quarter (March 31, June 30, September 30, or December 31), the church can pay the total withheld taxes directly to the IRS with its quarterly Form 941. Withheld taxes include federal income taxes withheld from employee wages, the employee's share of Social Security and Medicare taxes, and the employer's share of Social Security and Medicare taxes.
Note: You must use electronic funds transfer to make all federal tax deposits. Generally electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, or payroll service to make deposits on your behalf. If you fail to make a timely deposit, you may be subject to a 10-percent failureto- deposit penalty. EFTPS is a free service provided by the Department of Treasury. To get more information or to enroll in EFTPS, call 1-800-555-4477. You can also visit the EFTPS website at eftps.gov.
Payroll Tax Holiday! Under current law employees pay a 6.2 percent Social Security tax on all wages earned up to $106,800 (in 2011) and self-employed individuals pay a 12.4 percent Social Security self-employment tax on all their self-employment income up to the same threshold. The Tax Relief and Jobs Creation Act of 2010 provides a payroll tax and self-employment tax "holiday" during 2011 of two percentage points. This means that employees will pay only 4.2 percent on wages and self-employed individuals will pay only 10.4 percent on self-employment income up to the threshold. This provision was passed to stimulate the economy by increasing the take-home pay of millions of workers. The IRS has issued new withholding tables (see Publication 15) that reflect this change, and churches should be using the new tables. Employers and payroll companies will handle the withholding changes, so workers typically will not need to take any additional action, such as filling out a new W-4 withholding form.
• Churches having nonminister employees (or one or more ministers who report their federal income taxes as employees and who have elected voluntary withholding) may file their employer's quarterly federal tax return (Form 941) by this date instead of October 31 if all taxes for the third calendar quarter have been deposited in full and on time.
- Complete all year-end transactions to be sure that they are reportable on your income tax return.
- A church must make quarterly estimated tax payments if it expects an unrelated business income tax liability for the year to be $500 or more. Use IRS Form 990-W to figure your estimated taxes. Quarterly estimated tax payments of one-fourth of the total tax liability are due by April 15, June 15, September 15, and December 15, 2011, for churches on a calendar-year basis. Deposit quarterly tax payments electronically using the EFTPS system.
- Churches must designate a portion of each minister's compensation as a housing allowance by this date in order for ministers who own or rent their homes to receive the full benefit of a housing allowance exclusion for calendar year 2012. The designation should be adopted during a regular or special meeting of the church board, and should be contained in the written minutes of the meeting.
- Churches should designate a parsonage allowance for any minister who lives in a parsonage and who is expected to pay some of the expenses of maintaining the parsonage (e.g., utilities, furnishings, repairs, improvements, yard care). For sample housing and parsonage allowance resolutions, see chapter 6 in Richard Hammar's 2011 Church and Clergy Tax Guide.
- Donors must deliver checks on or by this date in order to claim a charitable contribution deduction for 2011. Checks that are placed in the church offering during the first worship service in 2012 will not qualify for a charitable contribution deduction in 2011, even if the check is predated to 2011 or was actually written in 2011. However, checks that are written, mailed, and postmarked in 2011 will be deductible in 2011 though they are not received by a church until 2012.
- Your marital status on this date determines your filing status for the year.
- If you have a minister or lay worker who is treated as self-employed for federal income tax reporting purposes, but who you would like to reclassify as an employee, the ideal time to make the change is on January 1 of the new year.
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