Church Law & Tax identified five key tax developments in 2023 that will affect church and clergy taxes for 2024
No change to the housing allowance
In March 2019, a federal appeals court rejected an atheist group’s challenge to the constitutionality of the housing allowance. The atheist group did not appeal this ruling, and there have been no further legal challenges.
Revoking an exemption from Social Security
Congress has created three limited windows of time since 1977 to allow ministers who exempted themselves from self-employment taxes by filing a timely form 4361 with the IRS to revoke their exemption. The latest was in 1999. Congress did not pass any bills in 2023 that would have authorized ministers to revoke an exemption from Social Security.
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Working after retirement in 2024
Many churches employ retirees who are receiving Social Security benefits. People younger than full retirement age may have their Social Security retirement benefits cut if they earn more than a specified amount.
Full retirement age (the age at which you are entitled to full retirement benefits) for people born between 1943 and 1954 is 66 years.
IRS to stop unannounced taxpayer visits
The IRS announced a major policy change in July 2023. The change ends most unannounced visits to taxpayers by revenue officers (ROs). This was done to reduce public confusion and enhance overall safety measures for taxpayers and employees.
ROs will no longer make unannounced or unscheduled field visits. Instead, they will send an appointment letter to schedule an initial or follow-up meeting with the taxpayer.
IRS addresses inurement, intermediate sanctions, and the definition of a church (PLR 202317022)
A private letter ruling (PLR) issued by the IRS in 2023 to a tax-exempt entity claiming to be a church while providing behavioral health services addresses three important topics:
- Excess benefit transactions
- What is a church?
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