Start Preparing for Tax Season Now

Make sure you’ve set your staff and contractors up to receive their Form 1040.

Preparing your organization’s taxes needs to start before 2020. Even if your church or ministry is 501(c)(3) tax-exempt, you still need to make sure that your staff and contractors can receive their Form 1040 to file their taxes. This should also include any contributions you may have made on their behalf, such as:

1. All employees should review and update their form W-4s. This is the form they would have filled out when they were first hired. It’s helpful to review this form when employees have gone through certain life events such as marriage or the addition of a new family member. These events may affect their tax withholdings, and in the event of life changes, the last thing they may be thinking about is their tax forms.

2. Section 74 of the Internal Revenue Code provides that churches and ministries can give a tangible gift. to an employee, including pastors, so long as it meets the requirements of a qualified employee achievement award set forth in sections 74 and 274(j). The following criteria must be met:

• The program is in writing, and awards are given under conditions and circumstances that do not create a significant likelihood of it being disguised compensation.

• The award is tangible property, such as tablets, laptops, desks, etc. The item cannot be travel, vacations, meals, lodging, theater or sporting event tickets, stocks, bonds, or other securities.

• The award is for length of service (after every completed fifth year of service) and is given as part of a meaningful presentation or ceremony. The award generally cannot surpass $400 in value.

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3. If your payroll service is not filing quarterly 941s for you, make sure to file it by January 15. You will have all of the information you need to complete this form by the end of December.

4. If any non-cash items valued at $5,000 or more were donated and disposed of (including sale, raffling, or gifting) within three years, you are required to file Form 8282 with the IRS.

5. Calculate any unrelated business income tax that your church may owe from any income that is generated over $1,000. Activities that may count are bookstore sales and rental income, among others.

6. Review your health insurance payments for any tax credits that may be applicable, such as the 25% refundable tax credit set forth by the Affordable Care Act.

First published on StartChurch.com. Used by permission.