Understanding and calculating a housing allowance for ministers is complex and, therefore, can be very confusing. Besides determining an amount that can be excluded from federal income tax, there are several rules to follow to ensure compliance with IRS guidelines....
Q: We would like to provide life insurance for our lead pastor and his spouse. Is this a taxable benefit? A: In some cases, an employer-provided life insurance policy can be considered a nontaxable fringe benefit. However, specific criteria must be met for...
Q: How do we determine whether staff are to be treated as employees or self-employed? A: The IRS provides several tests for determining whether someone should be classified as an employee or contractor. In fact, there are at least four sets of standards that...
I have a friend who often said “I love teaching so much that I would still do it even if I didn’t get paid.” I’ll bet that his employer loved the passion and enthusiasm my friend brought to his job each day. I pray that every minister and church employee has the same...
Does our church have to issue 1099s or W-2s? This is one question I get more than any other. There are many ways and many contexts in which this question is asked, but the motive is fairly consistent. Church administrators and treasurers are trying to determine...
The IRS Form 1099-MISC is used to report miscellaneous income to nonemployees. And while that sounds simple enough, it does present many challenges to churches and nonprofits. Confusion over what is included, when it is required, and how it should be completed is...
Q: Why is it important to create an accountable reimbursement plan? A: An accountable reimbursement plan is a policy adopted by the church board that allows employees to be reimbursed for business expenses. When employees make purchases for the church, they...
Q: We want to give our pastor an allowance account that he can use for hospitality, benevolence, and other ministry expenses. We’ve been told this fund might be taxable to our pastor. Is that true? A: Many churches will allow the lead pastor to control an...
Q: Recently, a senior pastor declined a bonus that the church board authorized. However, the church board placed the funds in a separate account and told the pastor he could have the funds whenever he wanted. When do these funds become taxable income to the pastor? A:...