Tax Developments to Note in 2022

How to prepare—and comply—for the upcoming tax season in the months ahead.

Several tax developments in 2021 will affect tax reporting by ministers and church staff for the upcoming tax-filing season, as well as reporting and records-keeping requirements for churches, in 2022 and beyond. Richard R. Hammar provides insights into 63 of these key developments in his 2022 Church & Clergy Tax Guide, now available for preorder.

Hammar comprehensively covers ten of these noteworthy developments in an exclusive Advantage Member article. This sneak-peek article offers a glimpse into the ten.

One development offers an important reminder that The Coronavirus Aid, Relief, and Economic Security (CARES) Act (2020) allows taxpayers to deduct up to $300 of cash contributions, whether they itemize their deductions or not. Congress extended this deduction through 2021 and increased it to $600 for married couples filing a joint return.

Another development related to charitable giving details why a California law demanding charities disclose identifying information about large donors was ruled unconstitutional—certainly good news for both charities and churches concerned about government overreach.

Two other developments address the issue of ministers seeking to exempt themselves from Social Security. Ministers are eligible for exemptions based on sincerely held religious beliefs. But many instead seek exemptions for financial reasons, not religious reasons, based on erroneous financial guidance they receive. The financial consequences can be dire for those who do not properly set aside funds for retirement.

Barring an act of the US Congress, it is very difficult for ministers to later receive a revocation for a previously obtained exemption. Congress has not acted on this issue, and no bills were introduced in Congress in 2021 that would authorize ministers to revoke an already-obtained exemption from Social Security.

However, a 2020 amendment by the Internal Revenue Service’s Internal Revenue Manual suggests a possible path for a minister to receive a revocation if he or she can show the exemption was sought solely for economic reasons, rather than religious ones. Hammar provides further details.

Hammar also addresses a ruling by a federal court in Illinois, in which the court rejected a minister’s argument he had successfully revoked his previously obtained exemption from Social Security.

Other developments address the denial of a donor’s deduction for a multimillion-dollar donation; severe penalties assessed for an excess benefit transaction (an all-too common occurrence in churches); the loss of a church’s tax-exempt status because its founder used the congregation’s assets for private benefit; and more.

Get the full picture. See Richard Hammar’s comprehensive review in the exclusive Advantage Member article, “10 Key Tax Developments Affecting Churches and Pastors in 2022,” or purchase your copy of the 2022 Church & Clergy Tax Guide.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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