CPA's & Consultants Providing Business Insight To Churches & Ministries

Year End Tax Reporting Reminders

By now, you should have provided your employees with their copy of Form W-2 (wage and tax statement), and your independent contractors with their copy of Form 1099-MISC (nonemployee income). These forms were due to the recipients by January 31, 2011. The filing deadlines for submitting the 1099’s to the IRS is March 1, 2011 (if submitting the forms by paper). If you are filing over 250 forms, you must submit them electronically by March 31, 2011. The W-2 forms must be filed with the Social Security Administration by February 28, 2011. If filing electronically, the due date is March 31, 2011. Late penalties apply if forms are not filed by the due date.

New 1099 Reporting Requirement Closer to Repeal

In yet another step forward in advancing a repeal of the onerous new 1099 reporting requirement, the US Senate voted overwhelmingly on February 2, 2011 to cancel the new requirement. President Obama has indicated that he would accept the change [after the House of Representatives approves it, which is likely to happen]. The vote came as part of a failed effort in Congress to repeal the entire Health Care Reform Act, even as the new law faces a constitutional challenge in the courts. The new 1099 rules scheduled to go in effect in 2012 would require reporting of all vendor payments, including those to incorporated suppliers and for purchases of products and materials. An exception for payments made by credit and debit card has been proposed. The new 1099 reporting requirement has drawn criticism from the business community due the immense cost and effort that would be required to comply.

IRS Solicits Comments on Exempt Application Process

At an average of 96 hours (according to IRS estimate), applying for tax exemption under Section 501(c)(3) is time-consuming and arduous. The Paperwork Reduction Act of 1980 (PRA) was established principally to ease the paperwork burden for individuals and entities when dealing with the federal government. While the PRA is not new, it is still effective in identifying processes that may be streamlined. There is now a new pilot program in place to reduce the burden when preparing and filing Form 1023. The Department of Treasury is asking for your help and has provided a website for you to have your say. Visit and take the opportunity to communicate with them your ideas for making the 1023 process easier.

Sample Policies are Available for your Church or Nonprofit

The redesigned 990 has brought into focus the need for policies and procedures which instill confidence in the exempt organization from its donors, clients, employees and the public at large. Many organizations are engrossed in their mission and need assistance in developing governance policies which reflect the current best-practices advice. We are often asked to supply sample policies to non-profit organizations who desire to improve their procedures and governance, and to partner with them in developing a comprehensive design for excellence and transparency. Contact us for more information. Also, here are links to resources from ECFA which may be of assistance.

Various 990-related Policies and Procedures:
Record Retention and Destruction Policy:
Sample Travel and Expense Reimbursement Policy:
Sample Credit Card Policies:

The Small Business Health Care Credit

Earlier this year the Patient Protection and Affordable Care Act (P.L 111-148) created a small business health care credit. Small businesses, including non-profit organizations and churches, may receive a credit for part of their employees’ health insurance premiums (up to 25% of premiums paid by nonprofit employers, 35% for other businesses). A “small employer” has fewer than 25 full-time equivalent employees for the tax year and pays them an average annual wages of less than $50,000 each. This credit is in effect for 2010 – 2013, and will increase in 2014. If you have more than 25 employees, and some of them are part-time, you may still qualify for the credit. Please follow the link for additional guidance from the IRS on the application and calculation of the credit.

New Hire Tax Credits Available to Churches & Nonprofits

Do you own business or are a leader of a tax-exempt organization? If so you may want to check out two new tax benefits for employers who hire and retain new workers. If you hire unemployed workers in 2010, you may qualify for a 6.2% payroll tax exemption. It applies to workers hired after February 3, 2010, and before January 1, 2011. And for each worker retained for at least a year, you may be eligible to claim a new hire retention credit of up to $1,000 per worker. The retention credit applies only to business income tax, so a church or nonprofit could only use it against unrelated business income tax. There are some additional provisions, so check out the details at,,id=223909,00.html

President’s Advisory Council on Faith-Based Partnerships Issues Recommendations

In its report released this month (March 2010), the Council gave recommendations to the President on areas of need targeted by the White House and also on reform of the Office of Faith-Based and Neighborhood Partnerships. Noting the disagreement among Council members on the issues of federally-funded programs provided by churches and religious organizations, and the oversight of those funds by government agencies, the following recommendations (among many others) were given:

Relief for Some on Foreign Bank Account Reporting

As you may know, the IRS now requires more persons who own or have signature authority over foreign bank accounts are required to file a Form TD F 90-22.1, foreign bank account report (FBAR) by June 30 of each year. This requirement impacts organizations and their officers who have overseas activities and accounts. Due to the complexity of the new reporting rules, the IRS has announced limited relief for some filers effective for the 2009 calendar year:

1. Signature authority only. Persons with signature authority only, but no financial interest in a foreign account, will now have an extra year to file the report. The report originally due on June 30, 2010, will now be due on June 30, 2011.
2. FBAR-related questions on tax forms. A taxpayer who qualifies for the additional one-year filing deadline, provided they have no other reportable foreign accounts, should check “NO” in response to the FBAR-related questions on their 2009 federal tax forms (those questions that ask about the existence of foreign financial accounts).

For more information see IRS Notice 2010-23 at,,id=104345,00.html

Bill Allows 2010 Haitian relief contributions to be deducted on 2009 returns

President Obama has signed into law a bill that allows donors who contribute to the Haitian relief effort to elect to deduct their 2010 contributions on their 2009 returns. The election would apply to those contributions made in cash after January 11, 2010 and before March 1, 2010.

The bill also relieves recordkeeping requirements for these contributions, in that a telephone bill would satisfy the Code Sec 170(f)(17) recordkeeping requirements if it shows the name of the done organization, the date of the contribution, and the amount of the contribution.

Minister’s Housing Allowance Challenged

In yet another California challenge to the constitutionality of the minister’s housing allowance (or parsonage allowance), the Freedom From Religion Foundation filed a lawsuit in Sacramento federal court arguing that ministers should not be granted a special tax exemption not available to others, as this represents a violation of the separation of church and state. The lead counsel for the Foundation is Michael Newdow, who gained notoriety as the attorney who led an assault on the pledge of allegiance in public schools. The lawsuit was filed in October 2009, and in December 2009, a federal judge ruled that certain ministers – in favor of the housing allowance – could not join the case as they had requested.