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January 10, 2012

Tips on Selecting a Tax Preparer

Choose a person with experience preparing ministers’ tax returns.

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Let’s assume you’ve decided to have your tax return prepared by a professional. The next step is to find someone who is experienced and competent in the preparation of ministers’ tax returns. Here are some tips to help you find such a person:

  • If possible, stick with a CPA or tax attorney. These professionals have completed a rigorous educational program, passed a difficult qualifying examination, and are subject to a comprehensive body of professional ethics.
  • Try to use someone local.
  • Find other ministers in your community who have their tax returns prepared by a professional, and ask questions. Who do they use? Are they pleased? What is the cost? How many ministers’ tax returns does the person prepare?
  • Call CPAs listed in your telephone directory: ask if they prepare ministers’ tax returns and, if so, ask how many they prepare.
  • When you find one or more possible candidates, consider asking a few simple questions that should be answered easily by anyone with any experience in handling ministers’ tax returns. Here are a few examples: (1) Are ministers employees or self-employed for Social Security purposes? Ministers always are self-employed for Social Security purposes with respect to their ministerial income. (2) Can I claim my housing allowance exclusion in computing my self-employment taxes? Absolutely not—ever. (3) If I report my church wages as an employee, are my wages subject to FICA taxes? The answer is never. (4) If I report my church wages as an employee, are my wages subject to income tax withholding? No, unless a minister elects voluntary withholding. (5) What is the minister’s housing allowance? The portion of a minister’s salary designated in advance by an employing church for housing expenses. This amount is not taxable in computing a minister’s income taxes to the extent it is used to pay housing expenses and does not exceed the home’s fair rental value.

Persons who are familiar with ministers’ taxes should be able to answer all of these questions knowledgeably.

This excerpt is from Chapter one of the 2012 Church & Clergy Tax Guide. Pre-order it now for tax help this winter and throughout the year.

Related Tags: attorney, CPA, finance, tax

Comments

Please do not forget EA's as good tax preparers. For example, I am an EA and have specialized in clergy returns for 35 years and have writen self-study courses on them. I am as good as any CPA. Some newer ministers do not have the funds for the higher fees of the CPA's and attorneys but they still need help. That is why I am a volunteer financial coach at Luther Seminary in St. Paul, MN.

Please do not exclude EAs from your recommendation. Unlike CPAs, ALL EAs have extensive training and continuing ed credits in taxation. Some CPAs have limited experience with taxes. As an EA, I have specialized in clergy tax preparation for over 2 decades and serve several hundred clergy clients each year. I fully agree with the questions you suggest be asked of a preparer. I just implore you to add Enrolled Agents to your list of recommended preparers.

I think that all of these points are extremely important mainly because you have to go with someone that you trust, and who better to trust then yourself. That is why I have been looking for a way to become a tax preparer so that I can just do everything myself. I would definitely be more productive during tax season that way.

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