Congregational Treasurers & Financial Leaders Newsletter December 2018

This newsletter seeks to provide basic information about topics relevant to volunteer treasurers and leaders involved in financial management in Northern Illinois Synod congregations.


Congregational Treasurers & Financial Leaders Newsletter

December 2018

This newsletter seeks to provide basic information about topics relevant to volunteer treasurers and leaders involved in financial management in Northern Illinois Synod congregations.  

The Northern Illinois Synod was pleased to be able to offer the Treasurer’s and Bookkeeper’s workshop on October 27, 2018 at Faith Lutheran Church in Rochelle.  There were many positive responses following the workshop.

DATES TO KEEP IN MIND

December 31, 2018

  1. Churches must designate a portion of each minister’s compensation as a housing allowance by this date in order for ministers who own or rent their homes to receive the full benefit of a housing allowance exclusion for calendar year 2019.  The designation should be adopted during a regular or special meeting of the church board, and should be contained in the written minutes of the meeting.
  2. Donors must deliver checks on or by this date in order to claim a charitable contribution deduction in 2018.  Checks that are placed in the church offering during the first worship service in 2019 will not qualify for a charitable contribution deduction in 2018, even if the check is predated to 2018 or was actually written in 2018.  However, checks that are written, mailed, and postmarked in 2018 will be deductible in 2018, though they may not be received by a church until 2019.
  3. Employees’ marital status on this date determines your filing status for the year.
  4. All employees should review their W-4 form and submit a new form if circumstances have changed. a. Note: “If the church did not have its employees complete new Form W-4 after the changes to the tax withholding tables created by the Tax Cuts and Jobs Act of 2017, it is advisable for all employees to complete a new Form W-4 at this time,” said Elaine Sommerville, a CPA and editorial advisor for Church Finance Today.
  5. Review payments to any independent contractors.  Preparation for filing Forms 1099-Misc should include a review of payments of $600 or more to independent contractors and related form W-9. The church should have on file a completed Form W-9 for all independent contractors (which would include correct address and Social Security/Employer Identification number for the contractor).
  6. IRS Tax Forms and IRS Publication 15
    1. What is the IRS Publication 15?  The IRS Publication 15 – Employer’s Tax Guide is a document published by the Internal Revenue Service detailing an employer’s responsibilities for filing and reporting tax information. 
    2. Now is a great time for the church to determine how to obtain all forms needed for processing payroll at the end of the year. 
      1. Electronic filing
      2. Hard copy forms  (Note: Forms 1096 and 1099-MISC still require original red-colored forms to be used if filing paper forms.)

January 1, 2019

  1. “If you have a lay worker who is treated as self-employed for federal income tax reporting purposes, but who you would like to reclassify as an employee, the ideal time to make the change is on January 1, 2019.”
  2. Make sure Ministers are properly classified for paying into the Social Security System.
    1. Churches should not withhold Social Security/Medicare for the purpose of paying into the system, since the tax code classifies ministers as self-employed.  As a result, a minister would pay self-employment tax with their individual tax return.  If a minister is incorrectly classified for Social Security and Medicare it could jeopardize their ability to receive tax-free housing allowance.  (Elaine Sommerville)
  3. Paying Guest Speakers Promptly.
    1. When a guest speaker arrives you should have a written check waiting.  The guest speaker should complete the W-9 form and travel expense reimbursement form ahead of time if possible.

Provided by: Sr Editor Richard R. Hammar, JD., LL.M., CPA Published by Christianity Today–Church Finance Today.

Elaine Sommerville, CPA and Editorial Advisor for Church Finance Today

January 31, 2019 – Filing Dates

  1. W-2, W-3, 1099-MISC & 1096 Forms
    1. Filing date applies to both mailed in forms and e-filed forms.
    2. Requests for filing and extension application for W-2’s must be submitted on IRS Form 8809 by the January 31 deadline.  The extension is for 30 days.
    3. The IRS penalty for failure to furnish statements by January 31, 2018, is $50 per W-2 statement.
  2. The Employer’s Quarterly Federal Tax Return and IL-941

Income Tax Regulations – Christmas and Other Special Occasion Gifts

“The income tax regulations specify that Christmas bonuses paid by an employer are taxable income for the recipient. Treas.Reg.1.61-2(a)(1) i.e.: A federal appeals court ruled that congregational offerings collected four days each year and presented to a pastor represented taxable compensation rather than tax-free gifts.”

“Many special-occasion gifts to ministers and lay church employees are funded through members’ contributions to the church (i.e., the contributions are entered and recorded in the church’s books as cash received, and the members are given charitable contribution credit). Such gifts should always be reported as taxable compensation and included on the recipient’s Form W-2 or 1099-MISC and on Form 1040.”

Person to Person Gifts

“Members are free to make personal gifts to ministers or lay employees, such as a card at Christmas accompanied by a check or cash.  Such payments may be tax-free gifts to the recipient (though they are not deductible by the donor), especially when small in amount.”         

Provided by 2016-2018 Church & Clergy Tax Guide by Richard R. Hammar, JD., LL.M., CPA.

HOW TO COMPLETE A W-2 FORM FOR PASTORS

Box a. Employee’s Social Security Number

Box b. Employer Identification Number (EIN) i.e. 36-XXXXXXX

Box c. Employer’s Name, Address, and Zip Code

Box d. Control Number – Number each W-2 being issued 1, 2, 3, etc.

Box e. Employee’s First Name, Middle Initial and Last Name

Box f. Employee’s Address and Zip Code

Box 1. Wages, Tips, Other Compensation: Salary + REFICA Reimbursement + Auto Allowance + Moving Expenses – (MINUS) Salary Reduction for Retirement Plan and/or Flex Spending.

(Note Auto Allowance:  If the Pastor is only being reimbursed each month for the travel receipts being submitted this is not considered income and would not be included in Box 1 as compensation.  Auto Allowance that would be included is if the Pastor is being compensated each month the same amount and no receipts are being submitted.

Note Moving Costs:   Prior to January 1, 2018, pastors and all church employees who incurred moving expenses related to a change of call or employment did not have to report the expenses as taxable income. This has changed.  Effective January 1, 2018:

  • Moving expenses are no longer a deductible expense except for certain members of the Armed Forces;
  • Any reimbursement by, or payment of, these expenses by the congregation are to be reported as taxable income to the employee.
  • If the church covers some or all of the moving expenses for an employee, the church is to report the amount on the W-2 Form in Box 1 as taxable income to the employee.)   (Rik Jamieson)

Box 2. Federal Income Tax Withheld:  Amount withheld from paycheckIf the pastor had no Federal Withheld Leave Blank

Box 3. Social Security Wages: Leave Blank

Box 4. Social Security Tax Withheld: Leave Blank (cannot withhold)

Box 5. Medicare Wages and Tips: Leave Blank

Box 6. Medicare Tax Withheld: Leave Blank (cannot withhold)

Box 7: Social Security Tips: Leave Blank

Box 8: Allocated Tips: Leave Blank

Box 9: Leave Blank

Box 10: Dependent Care Benefits: Leave Blank

Box 11: Leave Blank

Box 12a: Code E      $ Amount  Salary Reduction for Retirement Plan

Code DD  $ Cost of Employer-Sponsored Health Coverage  (Note: A Self Insured Church Plan  (Portico) is currently exempt from this requirement.)

Box 13:  Place X in Box for Retirement Plan (Only if Box 12a was completed; otherwise Leave Blank)

Box 14: Other – Type Housing and $ Amount  and /or Auto and $ Amount

              (Auto is only if the Pastor received compensation – refer back to the Note in Box 1.)

Box 15: State IL  Employer’s State ID number:  Same as Box b

Box 16: State Wages, Tips, Etc:  Same as Box 1

Box 17: State Income Tax:  Amount withheld from paycheck – If the pastor had no State Withheld, Leave Blank

Box 18: Local Wages, Tips, etc.: Leave Blank

Box 19: Local Income Tax: Leave Blank

Box 20: Locality Name: Leave Blank

Information provided in this document by;

Karen Kowgios partner at FK Partners LLP, January 2010 issue of New York Nonprofits

“Moving Cost Subsidies for Pastors, Staff, Now A Taxable Fringe Benefit”   (Rik Jamieson)

Elaine Sommerville, CPA and Editorial Advisor for Church Finance Today

Richard R. Hammar, JD., LL.M., CPA.  Published by Christianity Today – Church Finance Today.

The information contained in this newsletter is subject to change, as is the case with changes in best practices and legal requirements affecting congregations and nonprofit finance. This newsletter is not a substitute for professional accounting advice or financial advice that every congregation should seek based on their needs and circumstances.                                                                                              Prepared by June M. Cain, Synod Bookkeeper