Current Events

IRS Announces Delay in e-File Operations for 990 Filers

Because of updates to the Modernized e-file (MeF) system being made between 1/1/2012 and 2/29/2012, the IRS is granting an extension of time to file to March 30, 2012 to organizations whose due date or first extended due date falls within the update period. Organizations required to file electronically may file electronically between March 1, 2012 and March 30, 2012, or may opt to file a paper return during the suspension period instead. Of course, affected organizations may request an additional 3-month extension if they have not already done so. Organizations that have already been granted two extensions for a total of six months may not request a further extension.

Tax Exempt Organizations can Claim Tax Credit for Hiring Veterans

On November 21, 2011 President Obama signed the “3% Withholding Repeal and Job Creation Act” which extended the work opportunity tax credit (WOTC) for hiring veterans through December 31, 2012 and also allowed nonprofits to qualify for the credit via a reduction of payroll taxes. Qualifying veterans are those who are disabled, on government assistance, or who have been unemployed for more than 4 weeks in the year prior to being hired. For nonprofit organizations, the credit could be as much as $6,240 for hiring a disabled and unemployed vet, or as little as $1,560 for hiring an able-bodied vet who has been unemployed for at least 4 weeks in the year prior to being hired. Please contact your tax advisor or payroll specialist to determine your eligibility.

Supreme Court Won’t Hear World Vision Religious Discrimination Case

On October 3, 2011 the U.S. Supreme Court elected not to hear a case involving World Vision, a non-profit Christian organization. World Vision asserted in Sylvia Spencer et al v. World Vision that it has the right to hire or dismiss employees based on their religious beliefs, and a August 2010 decision by the 9th Circuit Court of Appeals in San Francisco agreed. The denial of hearing means that decision will stand.

In a press release, World Vision U.S. president Richard Sterns said: “Today's action by the U.S. Supreme Court represents a major victory for the freedom of all religious organizations to hire employees who share the same faith--whether Muslim, Buddhist, Jewish, Christian, or any other religion. I am pleased, relieved and gratified with the court's action. After four years of litigation, we at World Vision U.S. may now put this matter behind us, and continue our policy of hiring Christians."

Good news from the IRS regarding cell phones

IRS Notice 2011-72 tells us that when an employer provides employees with cell phones for business reasons, neither the business nor personal use of the phone results in income to the employee. And here’s the best news of all: No recordkeeping of the usage is required. And, if instead of providing the cell phone the employer reimburses the employee for providing a cell phone for business use, that reimbursement will not be taxable. The guidance applies for all tax years after Dec. 31,2009.

The employee must maintain the type of cell phone coverage that is reasonably related to the needs of the employer's business, and the reimbursement must be reasonably calculated so as not to exceed expenses the employee actually incurs. Additionally, the reimbursement for business use of the employee's personal cell phone cannot be a substitute for a portion of the employee's regular wages.

MINISTRY TAX, ACCOUNTING, LEGAL & COMPENSATION SEMINAR

Stanfield & O’Dell, along with two nationally recognized law firms, is pleased to offer a Tax, Accounting, Legal & Compensation Seminar specifically targeted at current issues impacting Christian ministries and their leadership teams. Senior pastors, administrators and other nonprofit executives will benefit from the seminar topics. The one-day seminar will be held in Dallas, TX on September 30, 2011. For additional information and online registration, please visit: www.stanfieldodell.com/ministrytax.php

State Registration for Charities & Religious Organizations

Currently, 39 states and the District of Columbia require charities that solicit funds within their borders to register with the secretary of state. Churches and religious organizations are generally exempt from the registration requirements in most states; however, some states require churches to register if the church is required to file Form 990, and some states require non-church religious organizations to register. Arizona requires to churches to register, but does not require financial information. Charitable solicitation rules vary from state to state and can be complex. Registration is also normally required for any professional fundraising company hired by the charity. In addition to the cost and time required to prepare the registration forms, most states also require a fee for registration. The states that don’t require registration? Delaware, Idaho, Indiana, Iowa, Montana, Nebraska, Nevada, South Dakota, Texas (except for public safety charities), Vermont & Wyoming.

Update on Health Insurance Tax Credit for Churches and Nonprofits

On May 5, 2011 the IRS updated information on its website related to the health insurance tax credit. For purposes of determining eligibility for the credit, ministers who are treated as employees are included in the calculation of full-time employees. The health insurance premiums paid for employee ministers are also included when calculating the credit. However, for purposes of determining average annual wages, the compensation paid to ministers is not included. Minister’s wages are not subject to FICA, and are thus excluded from the definition of “wages” for purposes of the credit. Generally, tax exempt organizations with fewer than 25 full-time equivalent employees and average wages less than $50,000 are eligible for the tax credit or a portion of the credit. The credit is refundable and is limited to the amount of required federal income tax withholdings from payroll and the employer share of Medicare tax.

Visit the IRS website to read more at http://www.irs.gov/newsroom/article/0,,id=220839,00.html.

President Signs Repeal of Expanded 1099 Requirements

As expected after a great public outcry and recent action in Congress, on April 14, 2011 President Obama signed into law the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 (HR 4; 1099 Act), which repeals both the expanded Form 1099 information reporting requirements and also the 1099 reporting requirements imposed on taxpayers who receive rental income. This removes the requirement to provide 1099s to corporations (other than law firms) and for the purchase of products and tangible property and reverts to the 1099 reporting requirements to the existing rules.

2012 Budget Proposal Limits Charitable Contribution Deduction

The President proposes to limit, starting in 2012, itemized deductions (including charitable contributions) for married taxpayers with income over $250,000 and single taxpayer with income over $200,000. President Obama explained that his 30% reduction in itemized deductions for high-income taxpayers is necessary in order to pay for a 3-year fix to the AMT (alternative minimum tax). The proposal limits the tax rate at which high-income taxpayers can take itemized deductions to a maximum of 28%. The language is found on page 212 of the Federal Receipts portion of the proposed budget (see at http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/r...)

Can Ministers Exclude Housing Allowances for More than One Home?

The Tax Court, in a divided decision, said yes to a minister that received an allowance for a second home that he had on a lake. The court rejected the IRS argument that the tax free allowance is limited to a single residence. More on this as it unfolds.