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Clergy Tax & Financial Services

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When knowledge and experience count.
Decades of experience in clergy income taxes

REMINDER:
If you haven't filed your 2008 tax return (or earlier returns), contact us now to lessen penalties.  

Get the most useful forms: 
Tax Forms for Clergy

Mileage Rate:
2010 standard business mileage deduction for is 50 cents/mile. 

2010 rate for medical & moving miles is 16.5 cents.  Rate remains 14 cents for charitable miles.

2009 rate for medical & moving miles is 24 cents.  First half of 2008 was 19 cents, 2nd half 2008 was 27 cents. Rate remains 14 cents for charitable miles.

Standard Business Mileage Rates:
2010 $.50/mile
2009 $.55/mile
2008 (7/1 on)
        $.585/mile
2008 $.505/mile
2007 $.485/mile
2006 $.445/mile
2005 (9/1 on)
        $.485/mile
2005 $.405/mile
2004 $.375/mile
2003 $.360/mile
2002 $.365/mile
2001 $.345/mile
2000 $.325/mile

The Rich Pastor
(A parable)

Don't Call Me
Tired of telemarketers calling when you're just sitting down to dinner (or any other time, for that matter)?   
Solution: Put your number on the National Do Not Call Registry.  You'll get rid of most of the annoying calls.  Calls from charities, political organizations, and phone companies won't be affected, nor will companies with which you have an existing business relationship.

If a third-party telemarketer calls on behalf of a charity, a consumer may ask not to receive any more calls from, or on behalf of, that specific charity. If a third-party telemarketer calls again on behalf of that charity, the telemarketer may be subject to a fine of up to $11,000.

Take advantage of decades of experience in clergy taxes. 

 We offer:

  Tax return preparation

  Tax planning

  Accelerated retirement planning

  Church payroll and accounting

  35 years of experience in representing clients before the IRS

Express 1099 and W2 Service:
Let us take the hassle out of filing your organization's 1099s and W2s this season.  We'll file them with the IRS and SSA and deliver your copies to you, so you avoid costly errors.

Download our Express 1099 order form in PDF here.  View/Download Now  
[If you don't have Adobe Acrobat Reader for viewing and printing PDFs, click here to download]

Church Treasurer's Guide to New Federal Tax Law:

Keep your church treasurer current.  Discusses how income to minister and church workers should be reported for maximum tax savings.   Download this free PDF report!       View/Download Now

Useful:

Get a free tax return transcript 
Great for loan and scholarship applications.

Tax Tips for 2008

Real Estate Tax Deduction — Here's an additional standard deduction for those who don’t itemize their deductions, but pay real estate taxes. You can now deduct real estate taxes you paid up to $500 for single filers or up to $1,000 for joint filers. This deduction is available for the 2008 and 2009 tax years and increases your standard deduction.

Recovery Rebate Credit — If you did not qualify for (or didn't receive the maximum amount for the 2008 economic stimulus payment) you may be entitled to a recovery rebate credit on your 2008 tax return.  You will need to know the amount of the payment you received in 2008, which can be found on your Economic Stimulus Payment Notice (Notice 1378).

New children — If you had or adopted a child in 2008, you should get a Social Security number for that child as soon as possible to ensure that you can include the child as a dependent on your 2008 return. Also, having or adopting a child in 2008 may mean you will receive a larger recovery rebate credit.

Saver's Credit —  Low- and moderate-income workers can take steps now to save for retirement and earn a special tax credit in 2008 and the years ahead.  The saver’s credit offsets part of the first $2,000 workers voluntarily contribute to Individual Retirement Arrangements (IRAs) and to 403(b), 401(k) plans and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.

You may still have time to make qualifying retirement contributions and get the saver’s credit on their 2008 tax return. You have until April 15, 2009 to set up a new IRA or add money to an existing IRA and still get credit for 2008. 

However, elective deferrals must be made by Dec. 31 to a 401(k) or similar plan, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, and the Thrift Savings Plan for federal employees. Employees who are unable to set aside money for this year may want to schedule their 2009 contributions soon so their employer can begin withholding them in January.

Those who can claim the saver’s credit are:

  • Married couples filing jointly with incomes up to $53,000 in 2008 or $55,500 in 2009;
  • Heads of Household with incomes up to $39,750 in 2008 or $41,625 in 2009; and
  • Married individuals filing separately and singles with incomes up to $26,500 in 2008 or $27,750 in 2009.

Like other tax credits, the saver’s credit can increase a taxpayer’s refund or reduce the tax owed. Though the maximum saver’s credit is $1,000 ($2,000 for married couples), it is often much less and, due in part to the impact of other deductions and credits, may, in fact, be zero for some taxpayers.

A taxpayer’s credit amount is based on his or her filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs. 

In tax-year 2006, the most recent year for which complete figures are available, saver’s credits totaling almost $900 million were claimed on nearly 5.2 million individual income tax returns. Saver’s credits claimed on these returns averaged $213 for joint filers, $149 for heads of household and $128 for single filers.

 

Check that Quicken Report: You may be losing deductions, and new problem

If you track your finances in Quicken™, one of the most useful things is to print out an end-of-year report summarizing all of your expenses for tax deductions.  Here's the pitfall: the report may leave out some of your expenses.  This is true if you create a report by changing a memorized report.  Say you opened a new credit card account.  Those expenses may not show up.

Here's what to do:  

1. Open the report, click Customize.

2. Click the Accounts tab, then All Accounts, then Mark All. (In earlier versions of Quicken, just Mark All.)

3. Click Categories tab, click Mark All.

Quickbooks™ presents similar problems.

2009 Quicken for Home & Business makes it easier for Schedule C filers to keep both personal and business expenses in one Quicken file.   To get a proper Schedule C report, you tag business categories with a Tax Line Item.   

The bad news for those who use a separate Quicken file for a business is that you have to assign a Tax Line Item to every category to get it to show on the Profit & Loss statement.   

 
 

Highlights — 2004 Tax Law Changes

 

Education Incentives

  • The maximum Tuition and Fees Deduction is $4,000 for those with Adjusted Gross Income (AGI) up to $65,000 and $2,000 for those with an AGI over $65,000 but not over $80,000. These AGI amounts are doubled for married persons filing jointly.
  • Distributions from Qualified Tuition Plans (QTPs) maintained by private educational institutions are excludible up to the amount of qualified educational expenses. This tax break had been limited to State-sponsored QTPs.

Tax Credits

  • The Additional Child Tax Credit is now refundable up to 15 percent of the amount by which earned income exceeds $10,750. The rate had been 10 percent. Taxpayers with more than two qualifying children may be eligible for a larger credit. Nontaxable combat pay counts as earned income when figuring this credit.

Retirement Plans / Individual Retirement Arrangements

  • The elective deferral limit for 401(k), 403(b) and most 457 plan participants rose to $13,000 ($16,000 for 403(b) participants for whom the 15-year rule applies). For SIMPLE plans, the limit rose to $9,000.
  • The catch-up contribution limit for persons age 50 or older rose to $3,000 for 401(k), 403(b) and 457 plans and to $1,500 for SIMPLE plans.
  • The $10,000 phase-out range for IRA deductions for those covered by a pension plan begins at income of $45,000 ($65,000 if married filing jointly or a qualifying widow(er)). It still begins at zero for married persons filing separately.

Extension of Expiring Provisions

These provisions were left unchanged through 2005:

  • Deduction for Educator Expenses (maximum $250)
  • Qualified Electric Vehicle Credit and Clean-fuel Vehicle Deduction
  • Archer Medical Savings Accounts
  • DC First-time Homebuyer Credit
  • Allowance of nonrefundable personal credits against the alternative minimum tax

Miscellaneous Items

  • When itemizing, taxpayers have the choice of deducting state and local income or sales taxes. An optional state sales tax table may be used in lieu of receipts for sales taxes paid. Sales taxes paid on a motor vehicle may be added to the table result, but only up to the amount paid at the general sales tax rate. Sales taxes on a boat, plane, home, or home building materials may be added if taxed at the general sales tax rate.  [The full story]
  • For most non-cash charitable contributions after June 3, 2004, taxpayers must satisfy these reporting requirements, based on the value of the deduction:
    • More than $5,000 – obtain a qualified appraisal and attach Form 8283
    • More than $500,000 (if art, $20,000 or more) – attach a copy of the appraisal

  • An “above-the-line” deduction is available for contributions to Health Savings Accounts made by April 15, 2005. The deduction is limited to the annual deductible on the qualifying high deductible health plan, but not more than $2,600 ($5,150, if family coverage). These limits are $500 higher if the taxpayer is age 55 or older ($500 each if both spouses are 55 or older). A person cannot contribute to an HSA starting the first month he or she is enrolled in Medicare.
  • Taxpayers may not exclude any gain on the sale of a principal residence if they sold the property after Oct. 22, 2004, and had acquired it in a like-kind exchange during the five-year period ending on date of the sale.
  • The standard mileage rate for business purposes rose to 37½ cents per mile for 2004 (40.5 cents per mile for 2005). For medical or moving purposes, it rose to 14 cents per mile. 
  • Business taxpayers may take a Section 179 expense deduction for up to $102,000 of qualifying equipment purchases, with this limit reduced by the amount that the total cost of section 179 property placed in service during the year exceeds $410,000. The limit for certain sport utility and other vehicles that are not subject to the passenger auto limits and were placed in service after Oct. 22, 2004, is $25,000.

Inflation Adjustments for 2004

The filing requirements, personal exemption, standard deduction and maximum Earned Income Tax Credit amounts are among the inflation-adjusted items.

  • The 2004 gross income filing requirements are:

Single — $7,950
Head of household — $10,250
Married filing jointly — $15,900
Married filing separately — $3,100
Qualifying widow(er) — $12,800

Different amounts apply if the taxpayer or spouse is age 65 or older, or if the taxpayer can be claimed as a dependent on someone else's return. There are also other specific situations that require the filing of a return, such as when the net earnings from self-employment are $400 or more.

  • The personal exemption amount for 2004 is $3,100 — $50 more than last year. Higher income taxpayers may have to reduce the personal exemption amount they claim if their adjusted gross income exceeds:

Single — $142,700
Head of household — $178,350
Married filing jointly or Qualifying widow(er) — $214,050
Married filing separately — $107,025

These taxpayers use a worksheet in the tax package to figure their deduction for exemptions.

  • The standard deduction amounts for 2004 are:

Single or Married Filing Separately — $4,850
Head of household — $7,150
Married filing jointly or Qualifying widow(er) — $9,700                      

Different amounts apply if the taxpayer or spouse is blind or is age 65 or older, or if the taxpayer can be claimed as a dependent on someone else's return.

  • The Earned Income Tax Credit amounts for 2004 are:

 

Qualifying child

Income Under*

Maximum Credit

Income for Maximum Credit

 One

 $30,338

 $2,604

 $7,650 — 14,049*

 Two or more

 $34,458

 $4,300

 $10,750 — 14,049*

 None

 $11,490

 $390

 $5,100 — 6,399*

(*These amounts are $1,000 higher for married persons filing joint returns.)

The maximum amount of investment income a person may have and still be eligible for the Earned Income Tax Credit increased to $2,650.

New Sales Tax Deduction Choice

The American Jobs Creation Act of 2004 gives taxpayers the option to claim state and local sales taxes instead of state and local income taxes when they itemize deductions. This option is available for the 2004 and 2005 returns only.

IRS Publication 600, Optional State Sales Tax Tables, helps taxpayers determine their sales tax deduction amount in lieu of saving their receipts throughout the year. Taxpayers use their income level and number of exemptions to find the sales tax amount for their state. The table instructions explain how to add an amount for local sales taxes if appropriate.

Taxpayers also may add to the table amount any sales taxes paid on:

  • A motor vehicle, but only up to the amount of tax paid at the general sales tax rate; and
  • An aircraft, boat, home (including mobile or prefabricated), or home building materials, if the tax rate is the same as the general sales tax rate.

For example, the State of Washington has a motor vehicle sales tax of 0.3 percent in addition to the state and local sales tax. A Washington state resident who purchased a new car could add the tax paid at the general sales tax rate to the table amount, but not the 0.3 percent motor vehicle sales tax paid.

Taxpayers will claim the deduction on line 5 of Schedule A, checking a box to indicate whether the amount represents sales tax or income tax.

While this deduction will mainly benefit taxpayers with a state or local sales tax but no income tax — in Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming — it may give a larger deduction to any taxpayer who paid more in sales taxes than income taxes. For example, you may have bought a new car, boosting your sales tax total, or claimed tax credits, lowering your state income tax.

 

Tax Archives:

 Tax Law Lowered Rates Starting in 2003

The Jobs and Growth Tax Relief Reconciliation Act, which President Bush signed on May 28, 2003, extends the 10 percent rate to cover the first $7,000 of taxable income for single persons, $14,000 for married couples. It also lowers the tax rates above 15 percent to 25, 28, 33 and 35 percent. This is a drop of two percentage points for each rate except the top one, which went down 3.6 points.

The new law also raises the standard deduction for married couples to $9,500 and extends their 15 percent tax rate to $56,800 of taxable income. (The amounts for single taxpayers are half those for married couples.) The changes reduce the “marriage penalty” – the difference between the tax couples pay and the amount they would have paid as two single persons.

 

Over-the-Counter Drugs To Be Covered by Health Care Flexible Spending Accounts

Over-the-counter drugs can now be paid for with pre-tax dollars through health care flexible spending accounts. Reimbursements for nonprescription drugs by an employer health plan are excluded from income. Thus, reimbursements by health flexible spending arrangements (FSAs) and other employer health plans for the cost of over-the-counter drugs available without prescription are not subject to tax if properly substantiated by the employee.

Drugs are increasingly becoming available over-the-counter without prescription. Many health plans no longer cover the cost of these drugs as over-the-counter. While an over-the-counter drug is less expensive than the prescription drug, the cost to many consumers increases because the price paid by the consumer for the over-the-counter drug is greater than the co-payment by the consumer when the drug was covered by insurance. This is especially an issue for individuals who remedy chronic health problems by regularly taking an over-the-counter medicine.

Revenue Ruling 2003-102 explains that the statutory exclusion for reimbursements of employee health expenses is broader than the itemized deduction for medical expenses (which does not apply to nonprescription drugs). Thus, the guidance clarifies that employer reimbursements of employee health expenses that are nonprescription drugs, including reimbursements through health FSAs and Health Reimbursement Arrangements (HRAs), are excluded from income like other employer reimbursements of employee health expenses. This will result in savings to consumers with access to employer plans who may purchase nonprescription drugs.

However, for purposes of the itemized medical expenses deduction, the cost of such over-the-counter drugs continues to be non-deductible. In addition, the cost of dietary supplements that are merely beneficial to the employee's health are not excluded from income.

 

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