Tax Update. Sunday, July 3, Hosted by Baptists C5 1:00 PM 2:45 PM D5 (Repeat) 3:45 PM 5:30 PM. Location Potomac 5-6. Tax Update.

Transcription

1 Sunday, July 3, 2011 Tax Update Hosted by Baptists C5 1:00 PM 2:45 PM D5 (Repeat) 3:45 PM 5:30 PM Location Potomac 5-6 Tax Update This workshop will review the various tax developments affecting both ministers and churches that have occurred since NACBA's 54th National Conference held last year in Orlando. Gene Hill, CPA Gene Hill is a Certified Public Accountant from Austin, Texas, specializing in full-time church tax consulting. He leads seminars and workshops for church groups, religious organizations, NACBA chapters and conferences, and has taught the tax portion for several Certification and Advanced NACBA seminars. He is an active member of the Texas Society of Certified Public Accountants, NACBA, and the Capital of Texas Chapter of NACBA (Austin). He has also written numerous articles for professional journals and publications and is a contributing editor for the Church Treasurer Alert. In 1998, Gene received the Church Management Hall of Fame Award from NACBA at the national conference for outstanding contribution to church management and NACBA. In March 2002, the Southern Baptist Business Officers Conference (SBBOC), held annually at the Southern Baptist Convention Annuity Board, honored Gene with the Taylor Daniel Award of Merit for outstanding contribution to Baptist Business. Gene holds a BBA in accounting from Baylor University. In 1994, Gene retired from the Internal Revenue Service as a senior appeals officer with 34 years of government service. During his career, he taught extensively both within and outside the IRS. Contact information: Gene Hill generhill@aol.com

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3 Tax Update for NACBA Washington D.C. National Conference Tax Developments New Resources New Tax Law New IRS Rulings and/or Announcements New Court Decisions TAX HELPS FROM IRS Telephone Numbers: General Information Tax Forms & Publications Form 941 Help Line Forms 1099, W-2, & W-3 Help Line Exempt Organization Help Line IRS Web Site: Publications: Pub 15 Circular E, Employer s Tax Guide Pub 15-A Employer s Supplemental Tax Guide Pub 15-B Employer s Tax Guide to Fringe Benefits Pub 969 HSAs &Other Tax-Favored Health Plans Pub 463 Travel, Entertainment, & Auto Expenses Pub 517 Social Security and Other Information for Clergy Pub 526 Charitable Contributions Pub 1771 Charitable Contributions - Substantiation & Disclosure Pub 1828 Tax Guide for Churches and Religious Organizations 1

4 OTHER TAX HELPS Nondenominational Resources Church & Clergy Tax Guide by Richard Hammar, JD Minister s Tax & Financial Guide by Dan Busby, CPA Church and Nonprofit Organization Tax & Financial Guide by Dan Busby, CPA Church Law & Tax Report (bimonthly) Church Finance Today (monthly) Helpful Web sites Church Law and Tax NACBA Home Page - Church Administration Resources - Federal and State Links Social Security Reporting - Electronic Filing Requirement for Tax Return Preparers 2009 Worker Act January 1, 2012 Electronic filing of Forms 1040 required if tax return preparer anticipates filing 100 or more income tax returns January 1, 2013 Electronic filing of Forms 1040 required if tax return preparer anticipates filing 10 or more income tax returns New Tax Law Education Jobs and Medicaid Assistance Act of 2010 (2010 Education Jobs Act) P.L Signed into law on August 10, 2010 Small Business Jobs Act of 2010 (2010 Small Business Act) P.L Signed into law on September 27,

5 New Tax Law Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Relief Act) P.L Signed into law on December 17, 2010 Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 P.L Signed into law on April 14, Education Jobs Act Advance earned income credit repealed for 2011 Old law ( years prior to 2011) Employer could pay advance earned income tax credit to employee Employee furnished a Form W-5 to employer Amount of advance EIC payment shown in tables included in Circular E Employer claimed credit for payment on Form 941 Total of advance EIC payments (paid during the year) reflected on employee s Form W-2 (Box 9) Small Business Tax Act of 2011 Cell phones removed from the definition of listed property Effective January 1, 2010 Includes similar telecommunications equipment (e.g., PDAs and Blackberry devices) Eliminates the IRC 274(d) requirement that employees maintain burdensome records to prove business usage Employer-provided cell phone must be for performance of services as an employee 3

6 2010 Tax Relief Act Purposes Retroactively reinstated and extended (through 2011) several tax breaks for individuals that had expired on December 31, 2009 Extended (through 2012) several individual tax breaks that were set to expire on December 31, 2011 Usually called the Bush Tax Cuts Provisions that were part of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) signed into law on June 7, Tax Relief Act Purposes Temporarily reduced (2011 only) employee s Social Security tax rate from 6.2% to 4.2% Offsets the Making Work Pay tax credit available for 2009 and 2010 Employer s share of Social Security tax remains at 6.2% for 2011 Payroll tax reduction will not affect the worker s future Social Security benefits Social Security tax cut will cost the Federal government an estimated $120 billion 2010 Tax Relief Act The reinstate and extend (through 2011) individual tax provisions included: Itemized deduction for State and local general sales tax (if greater than State and local income tax) The above-the-line deduction for qualified (tuition and fees) higher education expenses The $250 above-the-line deduction for teachers out-of-pocket classroom expenses The tax-free income exclusion (up to $100,000) on distributions from IRAs to charitable organizations 4

7 2010 Tax Relief Act The extend (through 2012) EGTRRA individual tax provisions included: Lower income tax rates (10%, 15%, 25%, 28%, 33%, and 35%) 15% capital gain rate 15% qualified dividend rate $1,000 child tax credit Marriage penalty relief Expanded American Opportunity higher education tax credit Expanded Coverdell Education Savings Account 2010 Tax Relief Act Several individual tax benefits were not extended by the 2010 Tax Relief Act including: Making Work Pay tax credit First-time Homebuyer tax credit State sales tax deduction on the purchase of a motor vehicle Additional standard deduction for State and local real property taxes Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 Repealed Form 1099 reporting requirement for payments made after December 31, 2011, to non-tax-exempt corporations Repealed Form 1099 reporting requirement for payments made after December 31, 2011, for goods and other property For Form 1099 purposes, repealed recipients of real estate rental income from being considered as engaged in a trade or business after December 31,

8 New IRS Rulings and/or Announcements IR , December 3, 2010 Standard business mileage rate for 2011 is 51 per mile New IRS Rulings and/or Announcements Notice , November 1, 2010 Reporting the cost of employer-sponsored group health plan on Forms W-2 is voluntary for 2011, but mandatory for 2012 The 2010 Health Care Act had provided that the Form W-2 reporting requirement was mandatory for all employers for 2011 Notice , April 18, 2011 The reporting requirement for 2012 remains voluntary only for employers who issue fewer than 250 Forms W-2 New IRS Rulings and/or Announcements IR , September 3, 2010 Effective January 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed under a Flexible Spending Account (FSA) unless a doctor s prescription is obtained Over-the-counter medicines purchased in 2010 can still be reimbursed from an FSA in 2011 Restriction provided by the 2010 Health Care Act 6

9 Freedom from Religion Foundation, Inc. v. Geithner 105 AFTR 2d (DC Cal 05/21/2010 Issue Does Section 107 of the Internal Revenue Code go too far in aiding and subsidizing religion by providing ministers and churches with tangible financial benefits not allowed secular employers and employees? Facts The government moved to have the case dismissed (without trial) because the plaintiff had not been harmed by the housing allowance exclusion provided to ministers The district court rejected the government s motion to dismiss and allowed the case to proceed to trial Freedom from Religion Foundation, Inc. v. Geithner 105 AFTR 2d (DC Cal 05/21/2010) Update On February 11, 2011, the Court granted a stay pending the Supreme Court s decision in Arizona Christian School Tuition Organization v. Winn On April 4, 2011, the Supreme Court held that Winn (an Arizona taxpayer) had no standing since he was not directly harmed by the tuition credit (claimed on Arizona state income tax returns) that was allowed to parents of students attending private religious schools Freedom from Religion Foundation, Inc. v. Geithner 105 AFTR 2d (DC Cal 05/21/2010 Update On April 21, 2011, the District Judge granted the defendant s (U.S. Government) request to file motions challenging plaintiffs standing in light of the Winn case Hearing on the motions scheduled for July 18, 2011 Pretrial conference scheduled for August 22, 2011 Bench trial scheduled for October 25,

10 Philip Driscoll vs. Comm 135 T.C. No. 27 (2010) Issue Can a minister use housing expenses for two houses (an in-town house and a lake house) for his housing allowance? Facts: Taxpayers claimed housing expenses attributable to their lake house for tax years 1996 through 1999 Lake house housing expenses varied from $25, to $195, Lake house housing expenses were all substantiated The Tax Court held that Sec 107 does not limit a minister to housing expenses of just one house and allowed the expenses of the lake house Time s Up - See You Next Year in Houston, TX 8