Current Events, Audit Issues, Governance Issues, Reporting Issues, Tax Issues

Cover the Basics – IRS Rules for Churches & Ministries

The Internal Revenue Service is presenting a webinar on July 25, 2012 that will cover some of the basic compliance requirements for churches and religious organizations. If you are unfamiliar with the basic IRS tax compliance requirements for church, or if you just need a refresher, this is an excellent opportunity to learn about several topics, including: How to Apply for Tax Exempt Status; Compensation of Ministers; Recordkeeping and Tax Reporting; Rules Limiting the IRS from Auditing Churches. For more information and registration see http://www.visualwebcaster.com/IRS/87466/reg.asp?id=87466.

Contribution Receipts – The Letter of the Law

David & Veronda Durden learned the hard way that the exact wording of the receipt from their church was of utmost importance when claiming a tax deduction. Because the church failed to include the words “No goods or services were provided in exchange” for their contributions, the IRS denied the deduction. The church provided a revised receipt, but it was too late. The receipt from the church must be provided prior to filing the tax return. The Durdens took the case to Tax Court, but on May 17, 2012, the court agreed with the IRS. The receipt was faulty and did not comply with IRC Section 170(f)(8) as contemporaneous substantiation of the contribution.
See the court ruling at http://www.ustaxcourt.gov/InOpHistoric/DurdenMemo.TCM.WPD.pdf

ECFA Releases Report on 2011 Charitable Giving

ECFA (Evangelical Council for Financial Accountability) released a study it performs annually on Church giving. The article highlights the 4th Annual ‘State of the Plate' Survey Showing Giving Increased Last Year; Budgets are Up, and Electronic Giving is on the Rise. The quick highlight was that of the congregations involved in the study, 51 percent saw giving increase in 2011. This is an indicator that the belt tightening during the recession may be easing. See the full article at the following link: http://www.ecfa.org/Content/State-Of-The-Plate-Survey

New Information Required on Form W-3

The Internal Revenue Service has revised the 2011 Form W-3, Transmittal of Wage and Tax Statements, to require additional employer information. All Employers must check one of five new boxes on Form W-3 indicating the “Kind of Employer”. Four of the selections focus on nonprofit organizations and government entities; all other types of employers (e.g. for-profit business) will select “None apply”. Most nonprofit and charitable organizations, including churches, will check the box “501c non-govt”. The three other choices are for state & local government non-501c entities, state & local 501c entities, and Federal government entities. For paper filers, Form W-3 must be filed by February 29, 2012. For electronic filers the due date is April 2, 2012. To review the 2011 General Instructions for Forms W-2 and W-3, click on the following link : http://www.irs.gov/pub/irs-pdf/iw2w3.pdf

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.