2012 Year-end IRS Regulations for the Church What You Need to Know; What You Need to Do Copyright 2012

Year-end IRS Regulations Why Worry about the IRS? No longer a church friendly government Government is broke We are low hanging fruit Loss of 501c(3) status Fines Obey the Law

Year-end IRS Regulations Print out Year-end Contribution Statements and Mail Them Statements must have the Statement on them NO goods or services were provided by the organization in return for the contribution IRS can deny the deduction if the statement is not on the Contribution form

Have Employees fill out Annually…  HSA/HRA/FSA insurance form if high deductible insurance is offered  Dental form if dental insurance if offered  Salary Reduction form for 401K or 403B retirement plans  Housing Allowance form (ministers only)  Strongly recommend a new W-4

Take Advantage of the New Limits!

About those I-9’s  I-9 must be filled out by all employees and filed separately from employee file  All employees (new employees and those hired since Nov. 6, 1986) must fill out section one of Form I-9 and churches must fill out section two  Do not file Form I-9 with U.S. Immigrations and Customs Enforcement (ICE) or USCIS. Form I-9 must be kept by the employer either for three years after the date of hire or for one year after employment is terminated, whichever is later. The form must be available for inspection by authorized U.S. Government officials (e.g., Department of Homeland Security, Department of Labor, Office of Special Counsel).

Depositing Withheld Taxes  Three types of taxes collected: Income taxes, employee’s FICA, employer’s FICA  Taxes paid monthly if taxes are $50,000 or less in the lookback period  Taxes paid bi-weekly if taxes are more than $50,000  See IRS Publication 15- download a new one

Form 941 – A Must  Filed Quarterly on the last day of the month and can be filed electronically  Use the 941X if you make a mistake  Done even if you only have ministerial staff  Taxes less than $2,500 are sent with form 944 at year end-be timely in payment:  For 2013: If you estimate your taxes will be less than $1,000 you may contact the IRS and request to use the 944 form. See document.

W-2 and W-3  W-3 is Transmittal form for W-2’s W-2’s – Fixing Mistakes  W-2c if you make a mistake  W-3c if you make a mistake on the W-3

W-3 Boxes XX

W-2 Preparation Ministerial Form

W-2 Preparation Non-ministerial Form

IRS form 4361  Regarding Ministers who opted out of Social Security  They can require that you produce it in the future  They are now doing so  Penalties can be severe if you cannot produce it

1099 MISC  Issued to self-employed for income tax or non employees. Issued if paid more than $600 annually  Not needed for a corporation or for anyone who will receive a W-2 from another employer for work done  Name, address and SS needed before 1099 can be issued. Get the info before payment is made and have them fill out a W-9  1099 is corrected by reissue with the box at the top mark checked  1096 is the Transmittal form for 1099 misc

FULL REPORT DOWNLOAD

Form DE-542 (CA)– Independent Contractors  WHO MUST REPORT:  Any business or government entity (defined as a “Service-Recipient”) that is required to file a Federal Form 1099-MISC for service performed by an independent contractor (defined as a “Service- Provider”) must report. You must report to the Employment Development Department within twenty (20) days of EITHER making payments of $600 or more OR entering into a contract for $600 or more with an independent contractor in any calendar year, whichever is earlier. This information is used to assist state and county agencies in locating parents who are delinquent in their child support obligations.

DE-1NP (CA)– Employment form for Non-Profits  An employer is required by law to file a registration form with the Employment Development Department (EDD) within fifteen (15) calendar days after paying over $100 in wages for employment in a calendar quarter, or whenever a change in ownership occurs.

DE-34 (CA) - REPORT OF NEW EMPLOYEE(S)  WHO MUST BE REPORTED:  Federal law requires all employers to report all newly hired or rehired workers to EDD within 20 days of their start-of-work date. State and county agencies use this information to assist them in locating parents who are delinquent in their child support obligations.  An individual is considered a new hire on the first day in which he/she performs services for wages. An individual is considered a rehire if the employer/employee relationship has ended and the returning individual is required to submit a W-4 form to the employer.

DE-9 (CA) - Quarterly Wage & With - holding Report  Can be done online at  State version of IRS 941  DE-9C Employee Information  Both must be sent in each Quarter

DE-7 (CA) - Annual Reconciliation Report  You can get assistance at No Longer Done!

Franchise Tax  Every church or ministry that incorporates in the state of California has to pay a minimum tax of $ per year unless the church or ministry files for an exemption. The exemption is not automatic!  Churches get these notices because they never filed for the exemption. In order to apply for the exemption, you need to file Form FTB-3500 or FTB-3500A. If you have recently incorporated (within the last 4 years), and have not filed for the exemption, we encourage you to do it immediately.

Withholding on Out of State Guest Speakers  California requires all churches and ministries to withhold 7% of all honorariums over $1, paid to guest speakers that live outside the state  Report to the state on form 592-B the amount of earnings and the amount of withholdings.  Beginning January 1st, 2010 the limit is $ Therefore, it may be safer to automatically withhold the 7%. The penalty for not withholding is at least 10% of the entire honorarium. This is a penalty against the church.

Excise taxes  If a church in California purchases something from an out of state vendor, the church is usually not charged sales tax because the vendor is from another state. However, in California tax code excise taxes are to be imposed upon churches and religious organizations that purchase tangible personal property from out-of- state sellers for use in California.  FORM 401-DS by January 31 st of each year  When the church gets products and begins to use them, it is required to report the purchase and pay an excise tax equal to the regular California sales tax.

Unrelated Business Incme  Any income that does not match the purpose of the church  Cell tower income, etc  File a 990T  Does not apply to churches renting your facilities to hold church – same type of business

Statement of Information  Updates your church office address  Updates your Principal Officers; Pastor (CEO), Secretary, Chief Financial Officer (Treasurer in small church)  Must be done biennially df df  No cost  Penalty for not doing so: possible Corporate Status Suspension  To see your status:

Other Federal Requirements  All cash donations less than $250 must be substantiated by either bank record (canceled check) or written communication from the charity  All donations over $250 must be substantiated by written communication from the charity with name of donor on statement  Property over $250 in value must have description

Other Federal Requirements  Gifts in excess of $5,000 must be appraised by an accredited appraiser and IRS form 8283 must be used to document the gift. Donation is the sale price.  Receipt should not list value of the gift  Donee (church) must keep sufficient records to validate gift-form 8282  Receipt must be given no later than date of donation or tax return due date 27

Additional Helps  Toll free (866) for help with W-2, W-3, 1096, 1099  Order IRS forms from or 00.html 00.html  EDD forms 

Where Do I Get the Forms?  Post office  Library  IRS – mail  Also helpful: All publications to stay on top of tax laws  Additional help from GuideStone %20Corporate/Ministry%20Tools/MinTaxGuide/2011/2112_Mini stersTaxGuide5.ashx %20Corporate/Ministry%20Tools/MinTaxGuide/2011/2112_Mini stersTaxGuide5.ashx

Additional Helps and Information David Rutledge EA, CEP, RFC Rutledge Financial Group

31 (559) direct line (559) cell phone Rod Wiltrout Church Finance Specialist