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Avoiding Tax Pitfalls

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posted 3/09/2011

Try also: Cell phone, Charitable contributions, Mortgage, Tax audit, Tax exempt, Unrelated business income tax

Avoiding Tax Pitfalls
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1
Orally designating a housing allowance is discouraged over putting it in writing.

2
After the start of a new year, it is too late for a church to designate a housing allowance for the previous year.

3
Church leaders can not incur personal liability for failing to withhold payroll taxes.

4
An employee works as a clerical secretary in the office. She signs checks and tax returns at the direction of and for the convenience of a supervisor. She is directed to pay other vendors, even though payroll taxes are unpaid. The secretary works under the dominion and control of a supervisor and is not permitted to exercise independent judgment. As a result, she is not personally liable for any unfiled payroll taxes.

5
Love gifts to visiting ministers and missionaries generally are taxable and should be reported to the IRS.

6
A church provides an employee with a cell phone and pays the monthly service charge. The employee is required to highlight personal calls on the monthly bill and timely reimburse the church for the cost of the personal calls, and the employee is charged a pro rata share of the monthly charge. The value of the personal use portion of the phone is a taxable fringe benefit.

7
Most ministers should report their federal income taxes as employees, since reporting as an employee avoids the additional taxes and penalties often assessed against ministers who are reclassified as employees by the IRS.

8
Audit risk is much lower when ministers report their federal income taxes as self-employed.

 

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