Four Things to do in June
By Raul Rivera
Now that Memorial Day has come and gone, many churches begin to prepare for summer programs like Vacation Bible School, teen camps and mission trips. While these times certainly build lasting memories in the young of the church, do not forsake the need to maintain your compliance with tax laws. Below are four things you need to do in early June before your church gets too busy with summer activities.
1. Fix the Minister's Housing Allowance
The rules of the housing allowance mandate that the church or ministry maintain accurate documentation. One common mistake made by churches is that they state specific dollar amounts for the minister's housing allowance. By doing so, they unknowingly limit what they can claim to reduce taxes. Also, many churches pay their ministers a salary in addition to a housing allowance. I do not recommend that you do it this way. There are three components that must be addressed when creating a housing allowance. They are as follows:
- Designate up to 100% of the salary as housing allowance: This makes the maintenance of the housing allowance easier. When you make that designation, make sure that you limit it to either the actual costs or fair rental value, as required by the Housing Allowance Clarification Act.
- Create minutes to document the designation: In order for the housing allowance to be valid, it must be documented and approved by the board of directors. Unfortunately, if your housing allowance is not properly documented, it cannot be retroactively implemented.
- Make sure that a housing allowance statement be used by the minister: This statement must include calculations for three scenarios: 1. The actual cost of providing a home. 2. The estimated cost of providing a home. 3. The fair rental value of the home. This statement should be turned in by January 15th of each tax year.
2. Follow the Tax Calendar Below
June 15th- Ministers Pay the 2nd quarter installment of estimated tax for 2012 using form 1040ES
June 15th- Church pays monthly payroll tax deposit
July 15th- Church pays monthly payroll tax deposit
July 31st- Church Files form 941 quarterly tax return for 2nd quarter.
3. Check Your Status in Publication 78
Publication 78 is a Cumulative List of Organizations that have received official 501(c)(3) status. Have you applied for official 501(c)(3) status? Have you been approved? If so, you need to check Publication 78 to see if your organization appears on the IRS list of approved charities. To check the list, go to the IRS website at www.irs.gov and type Pub 78 in the search field. Next you will type in your organization's information to see if you appear on the list. If you believe that you should be on the list, but your ministry does not appear, please give us a call at 770-638-3444 and we will help you.
4. Keep Your 501(c)(3) Status Current!
I have spoken to many pastors that received 501(c)(3) approval several years ago. Some got approval during a time when the laws were different. Unfortunately, the IRS requires that a church or ministry make adjustments as the laws and regulations change. For example: In 2002, churches were able to get 501(c)(3) status even if the majority of the Board of Directors were related. Today, the church is required to change its board of directors so that a majority of the board is unrelated and uncompensated. Failure to change could cause the church to lose its 501(c)(3) status. Because so many changes have taken place since 2006, I recommend that you consider coming to one of our conferences to learn updated information. We will very likely be in a city near you soon. At our conference, we discuss everything that you need to keep your church and ministry compliant with the latest IRS rules. I also recommend that you consider the Our Compliance Software Program. It has a 53 step program for you to perform your own compliance audit so that you do not have to hire it out to anyone. You will be able to do it completely on your own.