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Anne
Anne, Master Tax Preparer
Category: Tax
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Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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What are the recommended standard steps (for tax purposes)

Customer Question

What are the recommended standard steps (for tax purposes) for a new church?
Submitted: 1 year ago.
Category: Tax
Expert:  Anne replied 1 year ago.

Anne :

Hi

Anne :

Thank you for using justanswer.

Anne :

Normally I would give a synopsis of the information and then link you to the site for you to read more

Anne :

However, this time, I think that no synopsis is needed.

Anne :

Please see http://www.ministrymaker.com/beginners-guide-to-church-planting/

Anne :

http://www.ministrymaker.com/beginners-guide-to-church-planting/

Anne :

If you still have questions, please post them here

Anne :

 


I truly hope this information is helpful but please do not rate until you are satisfied. If you want to click on 1 or 2 just click on the continue to work with me button instead. You will then be able to add any other info or respond to what I have posted so far. Rating 3-5 gives me credit and a good rating but you can still converse with me.

Anne :

A colleague offered the following information that may also be useful for you:

Anne :

Again, I hope this helps, and if you have any further questions, please post them here

Customer:

Thank you for your answer. It was very helpful ministrymaker site but after read it I have some questions?

Customer:

1) In a church is allowed that the pastor be compensated?

Customer:

2) If yes, how much would be his reasonable compensation?

Customer:

3) What type of expenses or payments would be the normal expenses?

Customer:

4) If at the end of the year its net income is large what would be the way to handle that situation?

Anne :

First, yes, you are absolutely allowed to compensate your pastor. You would pay him on a W2

Anne :

Reasonable compensation is based on the area you live in, the size of the church, and frankly, how much is in your budget.

Anne :

You would need to factor in whether or not the job comes with a parsonage (value of which is NOT in the W2)

Anne :

For expenses, The clergy housing allowance provision of Section 107 of the Internal Revenue Code is perhaps the most important vehicle available to clergy for reducing individual income subject to Federal income taxes. The housing allowance provision enables clergy to exclude (rather than deduct) from taxable income a portion of the pastor’s income used to provide housing.


Clergy housing allowances are referred to by many names, including housing allowance, utilities allowance, utilities/housing allowance, parsonage allowance, rental allowance, housing allowance in lieu of parsonage, and possibly others. Each of these terms is subject to the provisions of Section 107. Housing allowances for incidental housing expenses and utilities expenses are commonly provided in addition to the rent-free use of a local church parsonage.

Anne :

Please see below:

Anne :

http://www.irs.gov/taxtopics/tc417.html

Anne :

Your final question re: net profit is best answered here:

Anne :

I sincerely XXXXX XXXXX helps

Customer:

The last question: Does the clergy have a special treatment in his personal taxes?

Customer:

Sorry for the delay to rate.

Customer:

Thank you so much for all your help

Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 1886
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
Anne and 3 other Tax Specialists are ready to help you
Customer: replied 1 year ago.

The last related question: Does the clergy have a special treatment in his personal taxes?

Expert:  Anne replied 1 year ago.
The short answer to your question is yes.......and here's why:

The gross income of a licensed, commissioned or ordained minister does not include the fair rental value of a home (a parsonage provided), or a housing allowance paid, as part of the minister's compensation for services performed that are ordinarily the duties of the minister.

A minister who is furnished a parsonage may exclude from income the fair rental value of the parsonage, including utilities. However, the amount excluded cannot be more than the reasonable pay for the minister's services.

If you (the minister) own your home, you may still claim deductions for mortgage interest and real property taxes. If your housing allowance exceeds the lesser of your reasonable salary, the fair rental value of the home, or your actual expenses, you must include the amount of the excess as other income.

A minister who receives a housing allowance may exclude the allowance from gross income to the extent it is used to pay expenses in providing a home. Generally, those expenses include rent, mortgage interest, utilities, repairs, and other expenses directly relating to providing a home. The amount excluded cannot be more than the reasonable pay for the minister's services.

The minister's employing organization must officially designate the allowance as a housing allowance before paying it to the minister.

The fair rental value of a parsonage or the housing allowance is excludable from income only for income tax purposes. No exclusion applies for self-employment tax purposes.

 

Most ministers get paid as self employed for things like weddings, funerals, guest speaker, etc.

 

For employment tax purposes, a duly ordained, licensed or commissioned minister is self-employed. This means that your salary on Form W-2, the net profit on Schedule C or C-EZ, and your housing allowance, less your employee business expenses are subject to self-employment tax on Form 1040, Schedule SE (PDF), Self-Employment Tax.

 

I hope this helps

Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 1886
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
Anne and 3 other Tax Specialists are ready to help you
Expert:  Anne replied 1 year ago.
I wanted to thank you for your generous bonus!

Please feel free to ask for me by name if I can help you again.


**PLEASE DO NOT REPLY TO THIS MESSAGE AS YOU COULD BE CHARGED AGAIN. I JUST HAD NO OTHER WAY TO SAY THANK YOU!
Expert:  Anne replied 1 year ago.
Thank you very much for the accept, and the excellent rating!

Please feel free to ask for me by name if I can help you in the future

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Anne
Anne
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Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses