Recent Posts

Most Used Categories

Tag: Taxation

You are Here :
PNCC, , , , ,

Potential issue for parish treasurers

At a training session for church treasurers, an accountant discussed recent instances where an IRS auditor has disallowed a charitable deduction to a church. In each case both the church and the donation were legitimate and documentation was ample. The churches had mailed the required annual statement of cash donations received from the giver. These auditors are disallowing the entire year’s donations because the annual statement of donations did not contain the required boilerplate language, “No goods have been received in exchange for this donation.”

Parish treasurers should be aware of this potential issue and insert the required language in their donation statements as appropriate.

Regulations and law:

Under U.S. Tax Code Sec. 170, a taxpayer is allowed a charitable contribution deduction for a contribution or gift to or for the use of an organization organized and operated exclusively for charitable or educational purposes. Under Code Sec. 170(f)(8)(A), no charitable contribution deduction for any contribution of $250 or more is allowed unless the taxpayer substantiates the contribution with a contemporaneous written acknowledgment of the contribution by the donee organization that meets certain specified requirements. Under Code Sec. 170(f)(8)(B), the donee organization must state in the acknowledgment whether the donee organization provided any goods or services in consideration, in whole or part, for the contributed property or cash. If so, the acknowledgment generally must include a description and good faith estimate of the value of any goods or services provided. (Reg. § 1.170A-13(f)(2)) Under Code Sec. 170(f)(8)(C), a written acknowledgment is contemporaneous if it’s obtained by the taxpayer on or before the earlier of: (1) the date the taxpayer files the original return for the tax year of the contribution; or (2) the due date (including extensions) for filing the original return for the year. (Reg. § 1.170A-13(f)(3))

See articles on this issue here, here and at Law as Ministry.

Current Events, ,

Charities and tax status – update

In follow-up to an earlier post from October 2010 —

From the IRS: IRS Identifies Organizations that Have Lost Tax-Exempt Status – Special Steps Announced to Help Revoked Groups

The Internal Revenue Service announced that it has released a listing of approximately 275,000 organizations that under the law have automatically lost their tax-exempt status because they have not filed annual reports as legally required for the past three years. If an organization appears on the list of auto-revoked organizations it is because IRS records indicate the organization has a filing requirement and has not filed the required returns or notices for 2007, 2008 and 2009.

The IRS has issued guidance on how organizations can apply for reinstatement of their tax-exempt status, including retroactive reinstatement. In addition, the IRS announced transition relief for certain smaller tax-exempt groups – those with annual gross receipts of $50,000 or less for 2010 and eligible to file Form 990-N, the e-Postcard. The relief allows eligible revoked groups to gain retroactive tax-exempt status and pay a reduced application fee of $100 rather than the typical $400 fee. More information, including FAQs and a Fact Sheet, can be found on the IRS website.

Everything Else, , , ,

Certain changes due to healthcare reform

FBMC.TV has published a series of videos describing the changes brought about by healthcare reform. Included are explanations of changes affecting Health Reimbursement Accounts; for instance, over the counter medications may no longer be covered for reimbursement. If you have such an account, it might be worthwhile to check out their videos so that you can make educated choices.

The following from the IRS: IRS Issues Guidance Explaining 2011 Changes to Flexible Spending Arrangements

The Internal Revenue Service issued guidance reflecting statutory changes regarding the use of certain tax-favored arrangements, such as flexible spending arrangements (FSAs), to pay for over-the-counter medicines and drugs.

The Affordable Care Act, enacted in March, established a new uniform standard that, effective Jan. 1, 2011, applies to FSAs and health reimbursement arrangements (HRAs). Under the new standard, the cost of an over-the-counter medicine or drug cannot be reimbursed from the account unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. The new standard applies only to purchases made on or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer’s plan.

A similar rule goes into effect on Jan. 1, 2011 for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs).

Employers and employees should take these changes into account as they make health benefit decisions for 2011.

For details on current rules, see Publication 969 [large PDF] , Health Savings Accounts and Other Tax-Favored Health Plans. Updates on this and other health care reform provisions can be found on the IRS Affordable Care Act page.

PNCC,

Attention clergy: Important IRS tax information

The Internal Revenue Service has published its auditing guide for clergy. The guide provides tons of useful information as to how the IRS will treat various items that appear (or should appear) on a clergy member’s tax return. The Minister Audit Technique Guide begins:

Under the Internal Revenue Code of 1986, as amended, (hereinafter referred to as ‘IRC’), ministers are accorded some unique tax benefits for income, social security and Medicare taxes, which present several potential examination issues on ministers’ tax returns in addition to income and expenses issues found in most examinations.

The Table of Contents includes an Overview Of Issues; Who Qualifies For Special Tax Treatment As A Minister; Income To Be Reported; Gift or Compensation for Services; The Parsonage Allowance; Retired Ministers; Members of Religious Orders and Vow of Poverty; Determination of Deductible Expenses Where Some Income is Tax Exempt; Self-Employment Tax: Exemption; Employee versus Independent Contractor and more.

Clergy and their tax advisors should familiarize themselves with the audit technique guide and IRS Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers.

All Right Reserved © 2005 - 2023