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2009 tax preparation ‘tips’ for ministers
Johnny Ross, BSC GuideStone Representative
February 15, 2010

2009 tax preparation ‘tips’ for ministers

2009 tax preparation ‘tips’ for ministers
Johnny Ross, BSC GuideStone Representative
February 15, 2010

As the deadline for 2009 tax

returns approaches (April 15, 2010), it is important to review some basic tax

information for those persons who are considered “ministers for tax

purposes.” First, be sure your filing status is correct. Most ministers

have a dual tax status.

In almost every case

ministers are employees for federal and state taxes; therefore, they should

receive a W-2 from the employing church, not a 1099. In addition, ministers are

always self-employed for social security and medicare purposes for ministerial

income; therefore, they pay the full SECA tax of 15.3 percent. The church

should not withhold and send in Social Security taxes to the Internal Revenue

Service.

Secondly, the employing

church should always count business expense allowances as taxable

income. For example, a car allowance, book/tape/periodical allowance,

convention/workshop allowance, etc. are reported in Box 1 of the W-2 as taxable

income.

It is only when the church

has established and administers an accountable business expense reimbursement

arrangement that these monies have no taxable consequence. Otherwise that money

is taxable.

If any of the business

expense funds are given as salary to the minister, even in an accountable plan,

then all of those reimbursements become taxable. The standard mileage

reimbursement rate for 2009 was 55 cents per mile. That amount has decreased to

50 cents per mile in 2010.

Third, be sure to claim the

legal amount for housing allowance. The law states that the minister must

claim the least of the following as the housing allowance for the year:

  • the amount designated in

    advance (this may never be done retroactively) as a housing allowance by the

    church;

  • the amount actually spent

    for housing costs during the year;

  • or

    the fair rental value of the

    home furnished with utilities.

For those who live in a

parsonage and have housing expenses the person must claim the lesser of the

following:

  • the amount designated in advance

    by the church;

  • or

    the amount actually spent

    for housing costs during the year.

Furthermore, these amounts

are only exempt from federal/state taxes; the minister must pay SECA taxes on

the housing allowance and/or the fair rental value of the parsonage.

Fourth, be sure to gather

and organize all tax documents including receipts for appropriate and correct

reporting purposes as you prepare your tax returns or pay an official tax

preparer. Be advised in securing a tax preparer that the person whom you enlist

understands ministers’ taxes since minister tax status is very different from

the ordinary citizen/tax payer.

Fifth, be sure to include

your social security number, sign and date your returns, and mail them to the

appropriate Internal Revenue Service address by the tax deadline. The IRS has

indicated that these are very common mistakes/oversights.

For additional information

and a step-by-step explanation of preparing your 2009 tax returns an excellent

resource piece by Richard Hammar, 2009 Ministers Tax Guide, is now posted on

the GuideStone Financial Resources web site.