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How do I ...?

• ... get tax forms?
• ... check the status of my federal tax refund?
• ... check the status of my federal stimulus payment?
• ... check the status of my state tax refund?
• ... prepare for my tax appointment?
• ... send files to Clifford & Associates?
• ... fill out a Form W-2 for a minister?
• ... determine or revise a minister's pay package?
• ... prepare financial reports for a church?
• ... prepare for a church financial review?
• ... handle buying/selling my house for tax purposes?
• ... prepare for retirement?
• How much should be saved for retirement?
• What kind of retirement income will I have?
• What are the most common retirement and tax-deferred account choices?
• Standard IRA
• Roth IRA
• 401K
• Keogh Plan
• SIMPLE-IRA
• 403b
• Tax-Deferred Variable Annuity
• Whole Life Insurance
• What other pension/retirement/deferred compensation plans can business owners adopt?
• Is there a minimum deposit?
• How much can be contributed?
• What forms and paperwork are needed?
• ... buy life insurance?
• What do I need to consider before I buy insurance?
• What about the policy I have now?
• How much life insurance do I need?
• What is the right kind of insurance?

When do I ...?

• ... file my tax return?
• ... file my tax return if I filed for an extension?
• ... throw away church records? How long should a church keep records?
• ... throw away my tax records?
• ... safely throw records away?

What is the IRS rate for ...?

• ... business mileage?
• ... medical mileage?
• ... charitable mileage?
• ... the Child Tax Credit?

How much do you charge ...?

• ... to prepare a tax return?
• ... to audit a church?
• ... to provide payroll services?
• ... to complete Form W-2's and/or other payroll forms?

Should/Must I ...?

• ... file a tax return?
• ... pay taxes on an inheritance?
• ... take funds out of my IRA or other retirement account?
• ... issue W-2's for all employees, or just the main ones?
• ... pay city tax? file a city tax return? 
• ... take a Required Minimum Distribution (RMD) from my retirement account? 

Definitions

• Is a minister considered self-employed or an employee?
• What is housing allowance?
• What are deductible housing expenses?
• Is the clergy housing/furnishing allowance always tax-free?
• Is there a ceiling on housing allowance?
• Should the church pay for housing or just reimburse the pastor?
• Should the church board approve my housing allowance amount?
• Does the amount of housing allowance need to be announced verbally or in written form at a board meeting?
• Does the amount of housing allowance have to be in the minutes of the board meeting?
• Is housing allowance considered income?
• What does a review involve?
• What is my filing status?
• What is a Required Minimum Distribution (RMD)?
• I am over 70½ and have an IRA, 403B, or 401K account. What is the “Required Minimum Distribution (RMD)? 

1. Q. Do I have to file a tax return?

A.General rule: A tax return must be filed if your gross income is greater than or equal to the sum of the standard deduction and the personal exemption amount for your filing status (this amount changes from year to year and can be found on the IRS website). 
If you are self-employed (this includes clergy) and your net business earnings are greater than or equal to $400 or owe any self-employement tax, you must file.
If you are a dependent, you may or may not have to file, depending on your gross income (the filing requirements change from year to year and can be found on the IRS website).
You may still want to file a tax return in order to get a refund of any tax withheld.
2. Q. How much do you charge to prepare a tax return?

A. Our fees are based on the forms required and the complexity of the return. Most of our fees range between $150 and $250. However, some of our fees are below $80, and a few range past $400. Clients with investments, rental property, partnerships, tuition payments, or home-based businesses will incur higher fees. Please use our organizer to help you know what information to bring or send. We also look for ways to simplify your tax return and keep fees to a minimum.
3. Q. How much do you charge to audit a church?

A. We provide review services. We do not do audits. If an audit is legally required, you must consult with a CPA. Typical fees for a review range from $600 to $1,800 depending on the scope of the review, the time needed, the magnitude of any problems encountered, and if rush service is required. 
4. Q. What does a review involve?

A. Our focus is to confirm the integrity of the financial statements and those who keep the records and create the reports. We consider church budgeting policies, accounting and bookkeeping procedures, and ways to improve the overall internal financial controls. Within the scope of our review, we train a team of church members to do a basic internal review of church finances. If there are no problems found, few churches benefit from an additional external audit.
5. Q. How much do you charge to provide payroll services?

A. Payroll service set-up costs depend on the number of employees and the specific services requested. Bookkeeping, consultation, financial review, bookkeeping training, compensation planning, and related services are all billed separately and customized according to each client's needs.
6. Q. What is my filing status?

A. There are five filing statuses. The following are the general requirements for each (there are exceptions):
• Single:

Unmarried or fail to meet requirements for any other status

• Married filing jointly:

Married as of the last day of the tax year OR
Spouse died during the tax year

• Married filing separately:

Married but not filing with spouse and not abandoned

• Head of household:

Generally must be unmarried and not entitled to file as a qualifying widow or widower with a dependent child; must also have provided more than half the cost of maintaining as your home a household that was the main home for a qualifying person. A qualifying person includes the following:

• A qualifying child who is single
• A qualifying child who is married AND you can claim as a dependent
• A father or mother who you can claim as a dependent (but not because of a multiple-support agreement)

May also qualify for head of household status if you, though married, file a separate return, your spouse was not a member of your household during the last six months of the tax year, and you provided more than half the cost of maintaining as your home a household that was the main home for more than one half of your tax year of a child who is qualifying.

• Surviving spouse:

Can file as this status for the two tax years following the death of a spouse if all four of the following are met:

1. You were entitled to file a joint return with your spouse for the year he or she died. It does not matter whether you actually filed a joint return,
2. You did not remarry in the two years following the year your spouse died,
3. You have a child, stepchild, or adopted child (a foster child does not meet this requirement) for whom you can claim a dependency exemption, and
4. You paid more than half the cost of maintaining a household that was the main home for you and that child, for the whole year.




7. Q. How do I get tax forms?

A. Tax forms can be aquired at most local libraries and online in PDF format at the IRS website.
8. Q. How do I prepare for my tax appointment?

A. Please download and use our organizer to help you with this process. Bring all W-2's, 1099's, 1098's, investment statements, income & expense reports for home-based businesses, records of tax payments made (estimated payments), your previous tax year statement, and updated personal information. 
9. Q. When do I throw away my tax records? How long should I keep tax records?

A. It depends on the purpose.We can speak to tax purposes most clearly. Often, there may be other reasons to hold on to records for a longer period of time.The IRS has three years from the due date of your tax return to challenge, audit or change the total tax owed. All tax related records should be kept for at least four years after the filing deadline. Investment records should be retained until the investment is sold plus four years. Rental property records should be kept for four years after the property is disposed of. If you did not file a tax return there is no statute of limitations!
10. Q. When do I file my tax return? What is the due date?

A. Your tax return and payment of any tax liability are due on April 15. If April 15 falls on a weekend or holiday, the return and payment will be due on the next business day. You can file to extend the due date of your return until October 15. However, even if you file for an extension, any tax you owe is still due April 15. Any unpaid tax will accrue interest and penalties if not paid by this date.
11. Q. When do I file my tax return if I filed for an extension?

A. If you file for an extension the new deadline for your tax return will automatically be October 15. You cannot get an extension of the due date beyond October 15. Even if you file for an extension, your tax payment is still due April 15. It will accrue interest and penalties if not paid by this date.
12. Q. When do I safely throw records away? 

A. We have worked on some audits that required tax records going back over twelve years due to some obscure regulations and circumstances. Corporations, partnerships, trusts and exempt organizations should keep all records at least seven years. Records of all stock purchases, mutual fund, bonds, other investments, land, property, buildings, vehicles, machinery and other business property must be kept at least seven years after those items are sold. If you did not file a tax return there is no statute of limitations!
13. Q. What is the IRS approved mileage rate for business mileage?

A. $.585 per mile for miles driven from July through December of 2008. $.505 per mile for miles driven from January through June of 2008. 
     IRS Annual Mileage Reimbursement Rates:
         2008 ..... $.585 (Jul.-Dec.)
         2008 ..... $.505 (Jan.-Jun.)
         2007 ..... $.485
         2006 ..... $.445
         2005 ..... $.485 (Sep.-Dec.) 
         2005 ..... $.405 (Jan.-Aug.) 
         2004 ..... $.375
         2003 ..... $.36 
         2002 ..... $.365 
         2001 ..... $.345 
         2000 ..... $.325 
14. Q. What is the IRS approved mileage rate for medical mileage?

A. $.27 per mile for miles driven from July through December of 2008. $.19 per mile for miles driven from January through June of 2008. 
     IRS Annual Mileage Reimbursement Rates:
         2008 ..... $.27 (Jul.-Dec.)
         2008 ..... $.19 (Jan.-Jun.)
         2007 ..... $.20
         

15. Q. What is the IRS approved mileage rate for charitable mileage?

A. $.14 per mile for miles driven in 2008. 
     IRS Annual Mileage Reimbursement Rates:
         2008 ..... $.14
         2007 ..... $.14

        


16. Q. Should I issue W-2's for all employees, or just the main ones? 

A. The person in charge of payroll should get Publication 15, Pub. 15-A, Pub. 5-B annually. W-2's are required for all employees. Independent contractors should receive Form 1099's.
17. Q. How much do you charge  to complete Form W-2's and/or other payroll forms? Can you create W-2's for us? 

A. Our fees vary with the number and complexity of forms required.  We will need detailed payroll information--number of employees; job titles; amounts withheld for federal, state, local, FICA, and Medicare taxes; whether 941's, Workman's Compensation, state, and withholding reports have been filed; clergy withholding, houwing allowance/parsonage, car mileage rembursement plan; etc. Fees depend on which forms need to be filed as well as the quality and accuracy of the payroll reports. Information submitted after January 24 may entail late charges. Please call our office if you would like to discuss pricing.
18. Q. Do I have to pay taxes on an inheritance?

A. It depends.
You do not have to pay federal estate tax on an inheritance. If any estate tax is due, the estate is responsible. The federal exemption on estate tax has been raised to $2 million. It will keep rising every couple of years.
Each state has its own separate limits. You may have to pay state inheritance tax. Check with your state to see if this tax applies to you.
If you inherit an IRA or other retirement fund, you may have to pay income tax on any increase in the value of the account(s). For instance, if your ancestor invested $10,000 in an IRA many years ago and the account is worth $100,000 when you inherit it, you would pay income tax on the $90,000 increase in the account.
If you inherit stocks or mutual funds, you may pay income tax when you sell such items. Your cost basis in the shares is usually the fair value of the shares on the date of death of the person from whom you inherited the shares.
For a detailed analysis of your particular situation, please contact our office.
19. Q. Is there a ceiling on housing allowance?

A. No! Set it generously above the expected expenses for the next year. See Chapter 6 in "How to Set Clergy Compensation" (available in our Offers Section) for more information.
20. Q. Should the church pay for housing or just reimburse the pastor?

A. Either is acceptable, but it is unusual for any employer to pay such expenses directly. Common practice is to pay the housing allowance with each paycheck in equal installments.
21. Q. Should the church board approve my housing allowance amount?

A. Whoever has the power to set salary (the elders, the congregation, the denomination, etc.) must also set the housing allowance. 
22. Q. Does the amount of housing allowance need to be announced verbally or in written form at a board meeting?

A. Written form is advisable because it provides an audit trail.
23. Q. Does the amount of housing allowance have to be in the minutes of the board meeting?

A. Yes!
24. Q. Is housing allowance considered income?

A. Housing allowance is earned income (subject to SE tax), but it is generally non-taxable to the extent used for federal income tax purposes.
25. Q. Is the clergy housing & furnishing allowance always tax-free? 

A. NO! Housing allowances and the fair rental value of parsonages are subject to Social Security tax of 15.3%. Also, any amount not spent on housing is fully taxable. 
26. Q. Is a minister considered self-employed or an employee?

A. A minister is an employee for federal income tax purposes and self-employed for Social Security tax purposes. (For more information, see "How to Set Clergy Compensation" available in our Offers Section.)
27. Q. How do I fill out a Form W-2 for a minister?

A. A minister is an employee for federal income tax purposes and self-employed for Social Security tax purposes. For most clergy, leave boxes a, 3, 4, 5, 6, 7, 8, 9, 10, and 11 blank. The treasurer needs to read the IRS instructions and possibly seek professional advice before entering any amount in those boxes for a minister. Box 1 should not include clergy housing allowance. The amount of housing allowance should appear in box 14. For more help, try our sample clergy W-2 form, or refer to our sample Form W-2, included in the How to Set Clergy Compensation book in our Offers Section.)
28. Q. What are deductible housing expenses?

A. All expenses to furnish and maintain the home of a minister are housing expenses. Maid and lawn service, food, and personal care products are not housing expenses. A minister does not pay federal income tax on the portion of pay designated as housing allowance if it is spent on qualified housing expenses. A minister still pays self-employment tax on the full amount of housing allowance. Any unspent allowance will be subject to federal income tax. The following list gives some items that are housing expenses:
1. Mortgage payment (principal & interest) or rent
2. Real estate taxes on the primary residence
3. House/property insurance on the primary residence
4. Utilities
• Gas/fuel oil/other heating fuel
• Electric
• Water
• Sewer
• Trash
• Local phone only (no long distance calls!), including special computer phone line rental
• Cable TV, cable modems, interenet access, DSL lines, & everything related
• Satellite dishes & Direct TV
• Internet service provider charges
5. Maintenance, repairs, & improvements
6. Major purchases (furniture, appliances, home computers, VCR/DVD player, trash cans, lawn tractors, etc.)
7. Minor purchases (light bulbs, cleaning supplies for the home, Christmas decorations)
8. Outdoor expenses (mower, yard bags, garden tools, etc., but not lawn service)




29. Q. I have bought/sold my house this year. How do I handle buying/selling my house for tax purposes? What do I need to do?

A. Bring a copy of the HUD closing papers to your tax appointment. There may or may not be tax repercussions. If the profit on the sale was below $250.000 ($500,000 if married and filing a joint return) and there was no home business or depreciation involved, there is usually nothing to report. 
30. Q. Should I pay city Income tax? Must I file a city tax return? 

A.Those who live inside a city with a tax must file. Those who work within a city’s limits must pay. If your employer does not withhold the correct amount, you must file and pay the difference. If there is no withholding, most cities want estimated payments. For most, wages, business profits and rental income are taxable. Clergy housing is exempt. Ohio’s city taxes are among the most complicated of any state.
31. Q. What is the IRS rate for the Child Tax Credit? 

A.This is a refundable credit of $1,000 for each child aged 17 and under. Taxpayers who also qualify for the Earned Income Credit usually receive less of a credit than the full amount.
32. Q. What is a Required Minimum Distribution (RMD)? Should I take a RMD? 

A. If you are over 70½ and have an IRA, 403B or 401K account, you must make a withdrawal or "required minimum distribution" (RMD) from your account every year. The IRS will assess penalties for failure to take the RMD. Check with your financial planner for details. 
33. Q. I am over 70½ and have an IRA, 403B or 401K account. What is the “Required Minimum Distribution (RMD)? 

A. In most cases, your financial institution or investment advisor will calculate the amount. Distributions must be made by December 31. Check with your financial advisor for details. 
34. Q. Should I take funds out of my IRA or other retirement account? 

A. It is possible to take funds out of your account, but you may incur large costs. All withdrawals are subject to income tax. If you are under the age of 59 ½, expect a 10% penalty on top of income taxes. If you are 70½ or older, you may be required to take a distribution out of your account. Plan on total federal taxes of 15-35% plus state income taxes. Check with your financial advisor for details.