SBOM holds tax preparation conferences to help ministers

SBOM holds tax preparation conferences to help ministers

By Michael J. Brooks
Correspondent, The Alabama Baptist

The greatest area of difficulty in a minister’s tax filing is his or her dual status, according to Lee Wright, state missionary in the office of LeaderCare and church health at the Alabama Baptist State Board of Missions (SBOM). A minister is an employee for federal income tax purposes and self-employed for Social Security taxes, Wright explained.

During the five conferences on tax preparation for ministers Wright conducted in February, he said ordained ministers should:

• be given a W-2 form from the church rather than a 1099,

• report any employee unreimbursed expenses the minister has on Schedule A,

• note additional miscellaneous income such as honoraria on Schedule C

• and determine Social Security and Medicare taxes on Form SE.

Wright said churches can provide health insurance premiums as a tax-free benefit for the minister as long as the plan is a group plan. The health plans offered by GuideStone Financial Resources are an example of group plans. This is true even if the minister is the only full-time employee in the church, he said.

A second major concern for ministers is the housing allowance, Wright said, noting ministers should continue to claim this benefit for now. The amount of salary designated as housing can be made at any time, just not retroactively, and can be as much as the fair rental value of the minister’s house furnished plus utilities, he said.
“Even then the minister must have documentation to show that the allowance was spent on housing expenses,” Wright noted. “Any unused housing should be reported as ordinary income.”

For bivocational ministers it is acceptable to claim housing on all their church compensation within the aforementioned guidelines, Wright said.

The housing allowance is exempt from federal income tax but is subject to the full 15.3 percent self-employment tax, he said.

A third area of concern is exclusions from tax, Wright noted.

“The church can provide group term life and disability insurance without tax implications,” he said. “And life insurance proceeds and inheritances aren’t taxable either.”

Wright said a minister’s best source of tax saving is retirement savings and noted Form 8880 as a form to consider.

A fourth area of concern is having an accountable reimbursement plan, Wright said.

“This plan means the minister turns in regular receipts and is reimbursed by the church so that these expenses aren’t counted as salary and aren’t subject to a 2 percent reduction if listed as miscellaneous business expenses on Schedule A.”

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