Current Events

Update on Health Care Credit for Nonprofits

As you may already know, the small business health care tax credit is available starting in 2010 for churches and nonprofits that meet the eligibility requirements (fewer than 25 full-time equivalent employees and average wages less than $50,000). All employees of the church are considered, including ministers who receive a W-2. The IRS has now clarified the procedures for nonprofit organizations to claim the credit. The IRS will issue a refund to qualifying churches and nonprofit organizations for up to 25% of the cost of providing health insurance to employees. The 25% credit will increase to 35% in 2014. To claim the credit, nonprofit organizations must file Form 990-T and attach Form 8941.

A Step in the Right Direction: Senate Votes to Repeal of the Expansion of Form 1099 Filing Requirements

The Senate, by a 81-17 vote, approved an amendment to repeal a health care reform provision that would have had a major paperwork burden on churches and ministries. The provision would have required churches, ministries, and businesses to report to the IRS any purchase of more than $600 of goods or services from any vendor. This requirement, scheduled to go into effect in 2012, greatly expanded the current 1099 requirement that applies only to payments to unincorporated providers, and only for services.

Let’s hope the House will follow the Senate’s lead, and do it quickly.

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.

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 http://www.irs.gov/irs/article/0,,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:

Warning! Churches and Scams

Click here for the latest message from the Federal Trade Commission regarding scams that are targeting churches:
http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt138.shtm

Health Care Reform Proposals

For a comparison of the current health care reform proposals from the three Congressional committees, go to www.kff.org/healthreform/sidebyside.cfm. The current proposals generally focus on forced coverage for employees, with penalties for employers who do not comply. For example, House Democrats propose a penalty of 8% of payroll for employers who fail to fund 65% of employee insurance premiums. Small employers would be exempt – depending on the proposal, a ‘small employer’ could mean fewer than 25 employees, or total payroll less than $250,000. The plans would also require all individuals to have insurance, or face penalties.

Statement of IRS regarding taxation of personal use of cell phones

A statement of IRS Commissioner Doug Shulman indicates Secretary Geithner and he will “ask that Congress act to make clear that there will be no tax consequence to employers or employees for personal use of work-related devices such as cell phones provided by employers.”

To read the full statement, go to http://www.irs.gov/newsroom/article/0,,id=209795,00.html

I hope Congress acts quickly on this request—it will make all our lives a little easier.