Most working parents are well aware they get a tax break to help cover the costs of sending their children to day care. But some parents overlook the tax advantage of summer day camp costs.
During school vacations, many parents turn to these supervised programs to provide child care while they work. Overnight camps don’t count, but the Internal Revenue Service says day camp expenses do qualify for this popular credit.
Regardless of whether you paid for after-class child care during the school year or a week of day camp during summer break, you can apply the costs to the child and dependent care tax credit and use it to cut your tax bill at filing time.
And while this credit also applies to care for dependents other than children, there are limits — on what you spend as well as how much you earn — that reduce the actual amount of the credit. Plus, you must make sure you and the person being cared for meet IRS eligibility guidelines.
Clergy Financial Resources
http://www.clergytaxnet.com
Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations.
WASHINGTON — Refunds totaling more than $1 billion may be waiting for one million people who did not file a federal income tax return for 2008, the Internal Revenue Service announced today. However, to collect the money, a return for 2008 must be filed with the IRS no later than Tuesday, April 17, 2012.
The IRS estimates that half of these potential 2008 refunds are $637 or more.
Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim a refund within three years, the money becomes property of the U.S. Treasury.
For 2008 returns, the window closes on April 17, 2012. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund.
The IRS reminds taxpayers seeking a 2008 refund that their checks may be held if they have not filed tax returns for 2009 and 2010. In addition, the refund will be applied to any amounts still owed to the IRS, and may be used to offset unpaid child support or past due federal debts such as student loans.
By failing to file a return, people stand to lose more than refunds of taxes withheld or paid during 2008. Some people, especially those who did not receive an economic stimulus payment in 2008, may qualify for the Recovery Rebate Credit. In addition, many low-and moderate-income workers may not have claimed the Earned Income Tax Credit (EITC). The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2008 were:
• $38,646 ($41,646 if married filing jointly) for those with two or more qualifying children,
• $33,995 ($36,995 if married filing jointly) for people with one qualifying child, and
• $12,880 ($15,880 if married filing jointly) for those with no qualifying children.
Individuals Who Did Not File a 2008 Return with a Potential Refund
State Individuals Median Potential Refund
Alabama 18,400 $641 $15,738
Alaska 5,800 $641 $5,952
Arizona 29,000 $558 $24,913
Arkansas 9,600 $620 $8,152
California 122,500 $595 $112,201
Colorado 20,500 $589 $18,909
Connecticut 12,500 $697 $13,893
Delaware 4,200 $644 $3,784
District of Columbia 4,000 $642 $3,791
Florida 70,400 $650 $66,974
Georgia 35,800 $581 $30,661
Hawaii 7,600 $714 $8,307
Idaho 4,700 $541 $3,878
Illinois 40,800 $692 $40,712
Indiana 21,800 $664 $19,590
Iowa 10,600 $658 $9,295
Kansas 11,500 $631 $10,084
Kentucky 12,300 $640 $10,501
Louisiana 20,500 $662 $18,859
Maine 4,000 $579 $3,248
Maryland 24,600 $641 $22,591
Massachusetts 23,900 $699 $22,957
Michigan 33,300 $660 $30,903
Minnesota 15,200 $584 $12,772
Mississippi 9,900 $591 $8,254
Missouri 21,600 $593 $18,213
Montana 3,600 $599 $3,192
Nebraska 5,100 $623 $4,371
Nevada 14,500 $619 $13,381
New Hampshire 4,300 $733 $4,518
New Jersey 31,300 $716 $31,185
New Mexico 8,000 $611 $7,420
New York 60,300 $686 $61,240
North Carolina 30,800 $558 $24,997
North Dakota 2,000 $625 $1,895
Ohio 36,400 $622 $31,018
Oklahoma 16,800 $620 $14,787
Oregon 18,500 $527 $14,819
Pennsylvania 38,700 $695 $35,565
Rhode Island 3,400 $674 $3,040
South Carolina 12,200 $547 $10,158
South Dakota 2,300 $669 $2,234
Tennessee 18,400 $626 $16,130
Texas 96,200 $689 $97,057
Utah 7,800 $536 $6,676
Vermont 1,700 $647 $1,410
Virginia 30,800 $624 $28,670
Washington 29,900 $705 $32,138
West Virginia 4,300 $687 $4,068
Wisconsin 14,100 $592 $11,885
Wyoming 2,600 $773 $2,919
Grand Total 1,089,000 $637 $1,009,905
Source: IRS
Clergy Financial Resources
http://www.clergytaxnet.com
Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations
Hunting for a New Ministry Position Could Help Cut Taxes
Your search for new work in the ministry must be in the same field in which you’re currently or were formerly employed.
Seminary graduates are out of luck. The costs you incur in getting your first job aren’t deductible, because the tax law only allows you to write off expenses incurred in searching for another position in your present occupation.
What you can write off
• Employment and outplacement agency fees.
• Resume services.
• Printing and mailing costs of search letters.
• Want-ad placement fees.
• Telephone calls.
• Travel expenses, including out-of-town job-hunting trips.
Clergy Financial Resources
http://www.clergytaxnet.com
Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations
Appeals Court Rejects Multiple Housing Allowance Decision
On Wednesday February 8, 2012, the Eleventh Circuit Court of Appeals in Atlanta overturned a decision made by the United State Tax Court(Commissioner vs. Driscoll) regarding the ability for a clergy to claim more than one home as a housing allowance tax exclusion.
In May 2010, a United State Tax Court finalized a ruling, from a 4-3 vote(in December 2010), that the term “home” in Section 107 of the United States Tax Code could be considered to be plural, meaning multiple homes could be used under Section 107 of the United States Tax Code. In February 2012, a panel of three judges in the Eleventh Circuit Court of Appeals ruled the opposite stating that “the word “home” does not readily support plural connotations.” Therefore, with this definition of the word “home,” Phil Driscoll would not be allowed to use multiple homes for his housing allowance exclusion.
It is expected that Phil Driscoll will continue through the appeals process.
The entire Eleventh Circuit Court of Appeal ruling can be found here
See Previous Articles
- June 16, 2011: Department of Justice Appeals “Multiple Home” Housing Allowance Ruling
- January 14, 2011: New Tax Court Ruling on Clergy Housing Allowance & Multiple Homes
Clergy Financial Resources
http://www.clergytaxnet.com
Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations.
Health Care Information on my W-2?
When you get your 2011 W-2, you might notice some new information on the form. Box 12 is where the church will report the cost of your group health insurance coverage. This amount is both the amount the church pays as well as the premiums paid via payroll deductions.
The amount, which will be designated by the code DD, is not taxable income. It’s informational only, designed to help IRS confirm taxpayers have coverage. Under the health care reform law, the Affordable Care Act, the data will help to enforce the eventual individual coverage if it survives a Supreme Court hearing as well as the so-called Cadillac tax on more expensive insurance plans.
However, if you don’t see anything in Box 12, don’t be concerned. The IRS ruled that reporting 2011 health care data is optional for employers.
Source – IRS
Clergy Financial Resources
http://www.clergytaxnet.com
Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations.
Tax Documents Necessary to File
Statements are on the way from employers, banks, stockbrokers and other institutions and agencies that were involved in taxpayers’ financial lives last year. Each of these groups has, by law, until Jan. 31 to get their annual tax statements in the mail to you.
Many taxpayers now receive these documents electronically. So be sure to double-check your email, not just the curbside mailbox, for these statements.
Common income, deduction statements
Most taxpayers depend on the same basic data to file returns. If you work for the church or any other employer, the Internal Revenue Service expects you, and the agency, to get a statement detailing that income. The data are slightly different, depending on whether you get paid a salary or do contract work, but there’s a form for either case.
W-2 — This is the key form, and you need one from each church or employer you worked for during the past year. Your W-2 shows how much money you made, how much income tax was withheld, Social Security and Medicare taxes paid, and any benefit contributions — retirement plans, medical accounts and child care reimbursement plans.
1098 — For most homeowners, mortgage interest is tax-deductible, and this document will tell you how much you paid last year. Your lender is required to send you one of these forms if you paid at least $600 interest. Actually, your mortgage company probably won’t send you an official IRS form, but a document of its own design that contains the same data. In addition to the mortgage interest, other information often found on this statement includes amounts paid toward points to get the loan and escrow disbursements for real estate taxes (also deductible) and property insurance (not deductible).
1098-E — Are you paying back a student loan? The interest on your educational debt is reported on this form; your lender must send you one if the interest tally is at least $600. You may be able to deduct your student loan interest and possibly other loan-related amounts, such as origination fees and capitalized interest.
1099-INT — If you earned more than $10 in interest on a bank account or a certificate of deposit, you’ll get one of these forms for each account. Don’t dismiss this statement if you reinvested the interest. Tax law says you received the income even if you didn’t actually have it in your hand, and reinvested earnings are still taxable income. 1099-INT statements also are issued to people who cashed in savings bonds.
1099-DIV — Earnings from individual stocks and mutual funds are reported on Form 1099-DIV. This will show dividends and capital gains distributed over $10. As with reinvested interest, if you used the dividends or distributions to buy additional shares of the stock or mutual fund, you still have to pay taxes. However, the distributions and certain, qualified dividends are taxed at the lower capital gains rates.
1099-B — If you sold stocks, bonds or mutual funds, you will receive a 1099-B from your broker or mutual fund company. This will tell you the number of shares sold, when they sold and the amount you got for the sale. You’ll need this information, along with the date you bought the shares and the amount you paid for them, to figure your taxes. Beginning with 2011 statements, brokers will begin providing information on the basis (the cost of an asset plus some adjustments) of sold stock.
1099-G — Taxpayers who got a refund of state or local taxes last year will get this form. If you used those taxes as a deduction on your previous year’s federal income tax return, you’ll need to report the 1099-G amount on this year’s return. You don’t have to worry about reporting this refund as income, however, if you took the standard federal deduction instead of itemizing.
1099-K – If you received payments via credit or debit cards or from third-party payment processors, such as PayPal, Amazon and eBay, you might receive a 1099-K reporting those amounts. There are triggers for amounts ($20,000) and transactions ($200), so not every person who receives such payments will get a 1099-K. This income, however, is taxable and should be reported even without issuance of a 1099-K. The new statement is an attempt to get more information on such payments to the Internal Revenue Service.
1099-R — If you received a pension or a distribution from an individual retirement account or retirement plan, the 1099-R provides the details of these transactions. The form is issued by your broker, pension plan manager or mutual fund company. You’ll also get a 1099-R if you rolled over money in a retirement plan, usually a 401(k) to an IRA, or if you converted a traditional IRA to a Roth IRA. A rollover usually is not a taxable event, but a pension payout may be.
1099-MISC — Self-employed individuals who earned $600 or more should get a 1099-MISC from the employer. You should get a separate 1099-MISC for each independent job you had during the previous tax year.
Late-arriving forms
There are a couple of statements you might need for your tax records, but because of the intricacies of the financial arrangements they cover, the documents do not always arrive before the April filing deadline. But if you get an extension to file, you shouldn’t have any issues.
Form 5498 — Any contributions made during the calendar year to any individual retirement accounts are reported on this form. The 5498 shows traditional IRA contributions that might be deductible on your tax return, as well as any rollovers, including a direct rollover to a traditional IRA, made during the last tax year. It also reports amounts recharacterized from one type of IRA to another. It notes any amounts converted from a traditional IRA, simplified employee pension or savings incentive match plan for employees to a Roth IRA.
Form 5498-ESA — Contributions to Coverdell education savings accounts, formerly known as Education IRAs, previously were reported on Form 5498, but these plans now are tracked on this statement. The youngster named as account beneficiary should get a copy of this document by April 30.
Schedule K-1 — Finally, if you received money from an estate, trust, partnership or S corporation last year, you should get a Schedule K-1. However, because of the complexity of many of these arrangements, account managers tend to send out K-1s later in the tax season — sometimes not until after the April filing deadline.
Because you do need to know this amount of K-1 income to file your return, taxpayers who get K-1s tend to file Form 4868, Application for Automatic Extension of Time to File, to get six more months to get all their tax statements in hand. With the extended October deadline now approaching, you should have your K-1 in hand.
Clergy Financial Resources Reminds Parents of Ten Tax Benefits
Your kids can be helpful at tax time. That doesn’t mean they’ll sort your tax receipts or refill your coffee, but those charming children may help you qualify for some valuable tax benefits. Here are 10 things Clergy Financial Resources wants parents to consider when filing their taxes this year.
1. Dependents
In most cases, a child can be claimed as a dependent in the year they were born.
2. Child Tax Credit
You may be able to take this credit for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit.
3. Child and Dependent Care Credit
You may be able to claim this credit if you pay someone to care for your child or children under age 13 so that you can work or look for work.
4. Earned Income Tax Credit
The EITC is a tax benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund.
5. Adoption Credit
You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. If you claim the adoption credit, you must file a paper tax return with required adoption-related documents.
6. Children with earned income
If your child has income earned from working, they may be required to file a tax return.
7. Children with investment income
Under certain circumstances a child’s investment income may be taxed at their parent’s tax rate.
8. Higher education credits
Education tax credits can help offset the costs of higher education. The American Opportunity and the Lifetime Learning Credits are education credits that can reduce your federal income tax dollar-for-dollar.
9. Student loan interest
You may be able to deduct interest paid on a qualified student loan, even if you do not itemize your deductions.
10. Self-employed health insurance deduction
If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage for any child of yours who was under age 27 at the end of the year, even if the child was not your dependent.
Clergy Financial Resources
http://www.clergytaxnet.com
Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations.
Keep the IRS off your back this month – W-2 & 1099 Filing
It’s time to mail out those W-2s and 1099s again. Yes, it feels like a waste of time and money, but pay attention: The IRS takes this very, very seriously.
It’s a January ritual as inevitable as the collapse of New Year’s resolutions: The mailing of W-2s and 1099s. While your employees may regard their arrival as almost a natural phenomenon, like January frost, you know better. Someone has to be responsible for filling out those tallies of the previous years’ wages and contract income and getting them into the hands of the employees. And, as with everything else concerning your church, that responsible party could be you.
There is a reason you need to pay attention to this duty now: Deadlines are fast approaching. For any worker whom you paid more than $600 in 2011, you must do two things: (1) make sure the employee or contractor receives the proper form before the end of the month; and (2) make sure that you file this information with the IRS.
How to make the deadline
The due date is generally January 31. You meet the IRS requirement if you’ve properly addressed the appropriate form (W-2s to employees and—usually—1099-MISCs to contractors) and mailed it on or before that deadline.
If you just can’t make the January 31st deadline, don’t fret—as long as you have a good reason. Just send a letter to the IRS before January 31 with details about your church, the employee and the reason for the delay, and ask for an extension. For more information, like the mailing address and the specific information you have to include in your request for extension, go to www.IRS.gov. If you can’t find the employee or contractor for some reason, you still have to keep copies of the undelivered tax documents for four years.
The downside for failing to issue a correct Form W-2 or 1099 in time is no joke: Penalties range from $30 to $100 per document. That can add up fast, and it doesn’t stop adding up until it reaches the small penalty cap of $500,000. Worse: if the IRS determines that your failure to file is the result of intentional disregard of its requirements, the penalty is at least $250 per payee statement with no maximum. If you willfully file a fraudulent claim that you made payments to a person when you didn’t, that person can also sue you for damages of $5,000 or more.
Why you can’t file and forget
Remember that your obligation does not end once the forms are winging their way to your employees. You also have to get the data to the IRS. Generally, you have until February 28 (yes – even in a leap year!) to loop the tax agency in.
If you are not sure whether a person working for you is a contractor or an employee, you need to do some research to get the right answer. It’s a complicated issue, most clergy are recognized as dual status employees and do require form W2. If you control only the result of a person’s work with no job description, you should probably file a 1099. The worker’s classification is something that you have to get right – there are tough penalties for improperly treating employees as contractors.
If you are scrambling right now to gather all this information and get it to your employees and the IRS, be sure to take some time to think about how to avoid the same last-minute rush next year. Filing paperwork for the IRS is nobody’s core business (except accountants and payroll firms), and you don’t have to get very big before wage accounting isn’t worth the headache—or the risk. Let someone else do that for the IRS.
A FAST and SIMPLE Solution for Church W2 Forms
Easy W2 filing is a Click Away
2012 Church & Clergy Tax Guide – NOW AVAILABLE
The 2012 Church & Clergy Tax Guide is now available for shipping.
Get a better understanding of U.S. tax laws as they relate to pastors and churches with the 2012 Church & Clergy Tax Guide; learn how tax laws apply to you, how to correctly report your federal income taxes and social security taxes, understand relevant exemptions, and reduce your tax liability as much as possible. You’ll also find easy-to-understand charts and real-life illustrations.
This book is designed to be a resource for ministers and also church treasurers, board members bookkeepers, attorneys, CPA’s and tax practitioners throughout the year. Entire chapters are devoted to the tax laws you have the most questions about, including:
-Tax changes to help prepare your 2011 returns
-Federal church reporting requirements
-Designated contributions
-Charitable contributions
-Business expense reimbursement
-Tax liability reduction
-Clergy retirement plans
Clergy Financial Resources Has Moved!
At the beginning of January 2012, Clergy Financial Resources completed their move to a new office building in Maple Grove, MN.
As Clergy Financial Resources’ business has expanded nationally, our demand for office space has grown beyond the capacity of our current location. Our new office space will not only meet our current needs, it will allow for future growth.
It is our vision that this step will provide a more professional position in the marketplace, along with the tradition of serving clergy with competence, integrity, and objectivity.
We plan to utilize the new office space as an education and training center for clergy and the church. This allows us to continue to be the leader in the religious community with more innovative products and services.
Many factors contributed to the decision to move to a new office building. The new location will allow us the ability to continue to serve our clients with the latest in technology, exceptional service and value.
We truly believe this move will prove to be a significant milestone in the growth and success of Clergy Financial Resources.
We sincerely appreciate the opportunity to serve you.
Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369
Tel: (763) 425-8778
Fax: (763) 421-6875
Email: cfr@clergytaxnet.com
