All posts from “February 2012”

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February 28, 2012

IRS Releases Latest "Dirty Dozen" Tax Scams

The 12 illegal or false claims that churches and leaders should avoid.

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Each year, the Internal Revenue Service releases the top twelve tax scams that individuals, nonprofits, churches, and businesses should watch for and avoid. The newest list, issued by the IRS this month, reveals the latest "dirty dozen":

  • Identity Theft
  • Phishing
  • Return Preparer Fraud
  • Hiding Income Offshore
  • "Free Money" from the IRS and Tax Scams Involving Social Security
  • False/Inflated Income and Expenses
  • False Form 1099 Refund Claims
  • Frivolous Arguments
  • Falsely Claiming Zero Wages
  • Abuse of Charitable Organizations and Deductions
  • Disguised Corporate Ownership
  • Misuse of Trusts

The IRS' full list includes full descriptions of each scam and warning signs to observe. For more help with taxes for churches and pastors, check out the 2012 Church & Clergy Tax Guide.

February 22, 2012

Weighing Outreach to Sex Offenders

A ruling against one Florida ministry underscores the complexities.

Churches and ministries that interact with sex offenders face numerous challenges, as our national research in 2010 revealed. A recent case in Florida involving Matthew 25 Ministries, an organization devoted to working with sex offenders, underscores the complex nature of these challenges.

Four years ago, the group leased residences in a development to house recovering offenders, only to quickly learn the state doesn’t allow convicted offenders to live within 1,000 feet of a nearby public school bus stop. The organization attempted to get the bus stop relocated. Then it tried to convince neighboring families to move. Eventually, the management company overseeing leases in the development notified 25 families of possible eviction if they weren't out by a certain date.

Lawsuits followed, leading to a recent decision from a federal judge that “both the ministry and [the leasing management company] were guilty of discrimination on the basis of familial status,” our sister website ChristianityToday.com reports.

What can churches and ministries take away from this story?

Continue reading Weighing Outreach to Sex Offenders...

February 21, 2012

Congress Extends Payroll Tax Holiday Through 2012

Churches must verify employee withholdings are correct.

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Congress on Friday voted to extend the payroll tax holiday through December 31, 2012, adding an extra $20 per week on average to paychecks for 160 million workers.

President Obama previously pledged to sign any extension into law once it was passed.

The payroll tax cut involves a 2-percent reduction in employee withholdings for Social Security. The holiday was originally passed toward the end of 2010 for the 2011 year; just before it expired on December 31, 2011, a temporary extension through February 29, 2012, was passed.

With the extension now approved for the remainder of 2012, employers, including churches, need to make certain they're meeting withholding requirements. Employees who are eligible for Social Security should have 4.2 percent withheld, as well as 1.45 percent for Medicare, for a combined 5.65 percent on each paycheck. Ministers are self-employed for Social Security with respect to their ministerial services, so their combined withholding rate for Social Security and Medicare is 13.3 percent.

The national deficit will grow by another $126 billion over five years as a result of the extension. Supporters of the extension said employees will not see lowered Social Security benefits in the future as a result of the reductions, although in recent weeks, debate about that has grown.

February 21, 2012

17 Ways the Church May Become Accountable to the State

Grassley Commission Outlines Progress on Key Points

Should the IRS form an advisory committee to oversee church tax law? Is the clergy housing exclusion constitutional? To what extent should churches be accountable to the government for the way in which they operate? These are three of the seventeen issues the year-old Commission on Accountability and Policy for Religious Organizations are wrestling with.

The commission, formed last year by the Evangelical Council for Financial Accountability, is chaired by Michael Batts, the managing shareholder of Batts Morrison Wales & Lee, an Orlando-based accounting firm serving nonprofits. Batts, along with ECFA President Dan Busby, also a member of the commission, outlined the issues and touched on key points during a virtual Town Hall meeting on February 17, 2012. They covered questions such as whether legislation is needed to curb perceived abuses of the clergy housing allowance exclusion, and if rules for determining the reasonableness of nonprofit executive compensation should be tightened.

Continue reading 17 Ways the Church May Become Accountable to the State...

February 16, 2012

Commission on Financial Practices Seeks Input from Churches

Online town hall meeting scheduled for Friday.

A little more than a year ago, Sen. Chuck Grassley (R-Iowa) asked the Evangelical Council for Financial Accountability to oversee an independent commission tasked with evaluating several financial and tax matters related to churches and nonprofit ministries. The goal: Determine whether more oversight—possibly administered through new legislation and regulation—is needed to curb any abuses and to foster clearer communication and relations between the Internal Revenue Service and religious organizations.

The formation of the Commission on Accountability and Policy for Religious Organizations came just as Sen. Grassley's office completed a three-year inquiry into the financial practices of six media ministries.

One year later, the commission is taking input from churches and ministries as it works to develop recommendations for Grassley. One method is through an online form available through March 31; the other was through a live, 90-minute town hall meeting broadcast online last week. Church leaders are invited to participate.

Among the areas the commission seeks input:

Continue reading Commission on Financial Practices Seeks Input from Churches...

February 15, 2012

Extension of Payroll Tax Holiday Appears Likely

Churches will need to verify employee withholdings are correct.

Congress appeared close late Tuesday to passing an extension of the payroll tax holiday through December 31, 2012, for millions of workers. A bill may be finalized Wednesday and put before President Obama for signature by the end of the week, the Associated Press reported.

The payroll tax cut involves a 2-percent reduction in employee withholdings for Social Security. The holiday was originally passed toward the end of 2010 for the 2011 year; just before it expired, a temporary extension through February 29, 2012, was passed.

Employers, including churches, need to make certain they're meeting the requirements of the temporary extension, withholding 4.2 percent for employees who are eligible for Social Security and 1.45 percent for Medicare, for a combined 5.65 percent on each paycheck. Ministers are self-employed for Social Security with respect to their ministerial services, so their combined withholding rate for Social Security and Medicare is 13.3 percent.

With an extension, these rates will continue through December 31, 2012, putting $20 into an average worker's paycheck each week, the Associated Press reported. The national deficit will grow by another $100 billion, but lawmakers have previously said employees will not see lowered Social Security benefits in the future as a result of the reductions.

Check ManagingYourChurch.com and Church Finance Today for additional updates.

February 14, 2012

How Did Giving Go in 2011 at Your Church?

Receive $125 in resources just for taking our short survey.

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My church's annual meeting took place a couple of Sundays ago. We're a modest bunch—about 125 in weekly attendance and a general budget of about $375,000.

God has done some remarkable things in our midst during the past year, despite our size (or perhaps because of it?). He has used a strong staff and lay leadership to cast a vision that integrates our church's presence into the surrounding community and provides an open, inviting environment, especially for young families.

And the people who attend have faithfully respond. Giving in 2011 for the general fund exceeded budget by 24 percent. Meanwhile, a capital campaign, launched in late 2010 to fund a building expansion in response to the growing number of young families in our midst, raised 94 percent of our church's $250,000 goal—well ahead of schedule.

And yet our church, which uses a congregational structure for making its decisions, acted in what I consider a prudent manner, passing a 2012 general budget at the annual business meeting that measures 2 percent less than in 2011.

How did giving go at your church in 2011? What are the prospects for 2012? Our annual State of the Plate survey is underway, and I hope you'll share what your church experienced. I pray you saw God move in small and big ways, and I pray you'll share how your church has responded to challenges inside and outside the building.

By taking 15 minutes today, you'll receive--for free--more than $125 in resources offered by our team, as well as Maximum Generosity and the Evangelical Council for Financial Accountability, the survey's other sponsors.

The past two years, we've received thousands of responses. The results become informative and educational for church leaders as they seek to understand giving trends at other churches, as well as the ways churches have responded to ups and downs. Get started now.

February 9, 2012

Appeals Court: No Housing Allowances for Two Homes

Ruling overturns controversial 2010 Driscoll decision.

A federal appeals court ruled Wednesday that the ministerial housing exclusion in the Internal Revenue Code is indeed limited to a single home.

The ruling overturns a split Tax Court decision (Driscoll v. Commissioner, 135 T.C. No. 27 (2010)) in which the lower court had ruled that the minister could exclude allowances paid to him for both his primary home and a lake home.

The lower court had based its ruling on its determination that the phrase "a home" can mean more than one home. Not so, said the 11th Circuit Court of Appeals on Wednesday. In an opinion that reads more like a grammar lesson than a court ruling, the appeals court ruled that "a" is, in fact, singular.

The appeals court decision restores the state of the law to what it was widely understood to be before the Driscoll case—one home.

It is possible that Driscoll could further appeal the matter, although we consider it unlikely. We will continue to closely monitor the case for that possibility.

A new update on this development is available atChurchLawAndTax.com. Watch for future updates in Church Law & Tax Report.

This update first appeared in The Nonprofit Watchman, a service of Batts, Morrison, Wales & Lee, P.A. Reprinted with permission.

February 9, 2012

Trademarking the Church

When should churches seek legal protections for names and logos?

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Editor's note: Two stories that garnered recent, widespread media attention have put the spotlight on churches and trademarks. Mars Hill Church in Seattle recently sent a cease-and-desist letter to another church over the use of a name and logo similar to its own; in Chicago, a church's trademark for a ministry has been challenged by Adidas, the athletic apparel company. We asked attorney Brock Shinen, who represents Copyright Solver and other faith-based organizations across the country, to address how churches should handle such situations.

Churches should feel confident that it's right and beneficial to register for trademark protection for their names and logos. A primary objective of trademark law is to eliminate confusion as to the source of goods or services.

A church applying for trademark protection won't necessarily take away another church's right to have its name and logo: If a church's name and logo are unique, trademark protection will be granted. If the name and logo are generic or descriptive, it won't.

When a church considers registering a name, it should come up with a unique name that truly distinguishes the church from all other churches. The problem is that most churches want to choose from the same few names. Either they want to use generic or descriptive terms (such as Anaheim Hills Community Church), and/or they want names already in use by thousands of other churches.

Continue reading Trademarking the Church...

February 7, 2012

The Top 7 Paid Positions at Churches

Across all paid church positions, men are paid 28 percent more than women.

Editor's Note: The 2014-2015 Compensation Handbook for Church Staff is now available. This resource details pay and benefits data for 14 church positions, including two new ones—part-time musician and part-time childcare provider. Each position is analyzed based on a variety of criteria, including education, experience, church size, and geography. The resource also includes step-by-step worksheets to help churches tailor compensation based on their unique circumstances. In the weeks and months ahead, watch ManagingYourChurch.com for graphics and short articles highlighting trends and other broad developments from the latest data.

Which positions in the church pay best for men and women?

Results from Christianity Today's biannual survey of 4,600 churches nationwide, which are featured in the new 2012-2013 Compensation Handbook for Church Staff, reveal the top 7 paid positions based on gender.

Continue reading The Top 7 Paid Positions at Churches ...