Church Tax Planning FAQs

IRS Form 1040 – Individual Income Tax Return

What are the requirements to receive a ministerial housing allowance?

One of the most misunderstood topics as it relates to ministerial compensation is the housing allowance. We take the time with each client, based on their previous year’s housing allowance and future expectations, to strategize on how to maximize this benefit.

How do I determine how much I can exclude from taxable income as housing allowance?

Housing allowances are limited to the lesser of three factors: (i) the amount actually spent on housing-related expenses, (ii) the fair rental value of the home, and (iii) the amount formally designated as housing allowance in advance by the church by the board of directors. The most overlooked of these is the requirement that housing allowances be officially designated by the church. To properly document their designation, they should be recorded in the annual board of directors’ minutes of the church before they are paid (in other words, at the beginning of each year). We are able to assist with this entire process and provide guidance and forms to ensure this process is properly documented.

Do you offer tax planning?

Yes. Ministers have one of the greatest tax advantages not available to others in the clergy housing allowance. All too often, this this advantage is under-utilized or not utilized at all. We believe that a minister’s best strategy for tax planning is to be well educated. Knowing what is available regarding tax-related benefits is the first step in tax planning.

At what time am I considered self-employed as a minister?

There seems to be a lot of misunderstanding when it comes to self-employment. The day that a minister becomes licensed, commissioned, or ordained, the IRS requires that they be treated as self-employed for Social Security and Medicare tax purposes (collectively known as “SECA” tax). This means that the church can no longer withhold and remit either of these taxes on the minister’s behalf. The minister must pay self-employment tax on all earnings from the church (including housing allowance) when filing their individual tax return unless they have formally filed IRS Form 4361 to opt out.

Corporate Tax Returns

Do you prepare corporate tax returns?

We often find that a minister will set up an LLC or corporation to properly run their various business ventures and it can be beneficial to have the same tax preparer handle both their personal and corporate returns. We have experience with partnership (Form 1065), S-Corp (Form 1120S) and C-Corp tax (Form 1120) returns.

I’m interested – what now?

Send us a message or give us a call at 317-570-9573.

IRS Form 990 – Return of Organization Exempt from Income Tax

What if our organization has never filed an IRS Form 990?

If you were not aware of the filing requirements (or simply have never filed a Form 990), we are happy to assist you in filing delinquent tax returns and to assist with any attempts to re-instate the tax-exempt status of the organization if tax exempt status has been revoked.

What is included on the informational return?

While content is determined upon the type of return that your organization must file, you should be prepared and understand that there are a few major pieces of information that will be disclosed publicly on the Form 990 and its related schedules:

Name and compensation for your board of directors, officers, and other key employees
Financial statements
Tax exempt purpose of the organization

What is the filing date for informational returns?

The filing date depends upon your organization’s fiscal year. If you operate on a calendar-year basis, your due date is May 15th of the year following the end of the filing year. Otherwise, the return is due on the 15th day of the 5th month following your fiscal year-end.

What states can you file informational returns for?

We are happy to assist with the filing of your federal informational return and can assist with preparation of most state forms your organization may be required to file if you would like us to.

How do we get started?