Leftover Thanksgiving turkey is in the refrigerator, Christmas lights are going up and the malls are teeming with holiday shoppers.
Unfortunately what most people forget about the holiday season is what they need to be doing to prepare themselves for tax season.
“April 15th means nothing because everything you do has to be done before Dec. 31,” said Kevin Andrews, a certified public accountant and member of Loveless Park Baptist Church, McCalla.
With the recent mass destruction of Hurricane Katrina, 2005 has brought about unusual circumstances for folks throughout Alabama, Mississippi and Louisiana. As a result, Congress passed the Katrina Emergency Tax Relief Act of 2005 (KETRA) in September. This legislation provides tax relief for individuals and families affected by Katrina, along with incentives for charitable donations.
“Church members who have been going to the coast to help with disaster relief now have a higher charitable mileage rate,” said Richard Collum, associate pastor of finances and administration at Morrison Heights Baptist Church, Clinton, Miss.
KETRA raised the mileage rate for charity work from 20 cents per mile to 34 cents per mile beginning Aug. 25 and ending Dec. 31, 2005. Many people may not be aware that they can use the mileage from their trips to the coast as tax write-offs, Collum said.
According to GuideStone Financial Resources of the Southern Baptist Convention (SBC), KETRA allows 100 percent deduction of cash charitable contributions made by individuals between Aug. 28 and Dec. 31, 2005, to any public charity including churches, ministries of a state Baptist convention or the SBC.
Therefore, according to GuideStone, an individual can make cash gifts to his church up to 100 percent of adjusted gross income and pay no federal income taxes for 2005. Gifts of appreciated property are still limited to 30 percent of adjusted gross income. Gifts from corporations are limited to Katrina relief.
This provision is one of the KETRA provisions that does not require an individual to be directly affected by Katrina.
Any and all cash donations made by an individual taxpayer during this time period qualify for exemption. Furthermore the Internal Revenue Service (IRS) may postpone certain tax deadlines for taxpayers who are affected by a presidentially declared disaster.
According to Jim Swedenburg, coordinator of annuity and insurance services for the Alabama Baptist State Board of Missions, the tax deadlines the IRS may postpone include those for filing income, estate, certain excise, employment tax returns, paying taxes associated with those returns and making contributions to an IRA.
Swedenburg also noted that it is important for church members to be reminded about year-end contribution deadlines that may benefit them come tax time in April.
“For contributions to be included in 2005, they must be received or postmarked before Jan. 1,” he said.
Swedenburg encourages donors to wait for their charitable contribution statements before filing their taxes in order to prevent losing the deduction of certain contributions.
Another way for ministers to ease their tax burden is to plan the designated minister’s housing allowance prior to the end of the year.
“The housing allowance for ordained ministers is very helpful. Ministers who own their home do not pay federal income taxes on the amount of their compensation that the church designates as a housing allowance, to the extent that the allowance is used to pay housing expenses, and does not exceed the fair rental value of the home,” Collum said.
According to Andrews, it is better to set the allowance too high and go back and change it than to set it too low.
“Even though the minister may change the allowance throughout the year, he cannot retroactively include expenses or income upon the church’s approval,” he said.
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