Treasurer’s Notebook

Treasurer's Notebook

The calculations used in the printing of this edition are based on figures to be used in 2021

April 2021

TABLE OF CONTENTS

Computing the Fair Share .................................................................................1 Local Church Tax Reporting Requirements......................................................2 Form 941 Filing Requirements..........................................................................3 Information for Completing Form W-2 for Clergy ...........................................4 Completing the Form W-3.................................................................................6 Form 1099 ? Misc..............................................................................................7 Ten Tax Tips......................................................................................................7 Pension Contribution Requirements..................................................................10 Medical Insurance Rates....................................................................................11 Benefit Amounts from CPP...............................................................................12 Pastor's Compensation Instructions ..................................................................14 Parsonage Guidelines.........................................................................................21 Accountable Reimbursement Policy .................................................................33 Housing Allowance Information .......................................................................52 Expense Categories Allowable Under Housing Exclusions .............................56 Guidelines for Local Church Treasurers ...........................................................57 Self-Employment Tax Worksheet ....................................................................61

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Computing the 2021 Fair Share Factors

The Fair Share Apportionment is determined by multiplying the average of total adjusted expenditures disbursed by a local church during each the three previous years as reported on the local church's Statistical Report by the ratio of the Conference Budget as compared to the total of the reported adjusted expenditures for all churches within the Conference. Below is a listing of the Statistical Report lines used to calculate a church's adjusted total expenditures and an example of an apportionment calculation.

From Local Church Statistical Report

40b. Amount over required 70% health premium funded by church 41a. Total amount paid in base Compensation for pastor 41b. Total amount paid in base compensation for associate appointed by Bishop 41c. Total amount paid in salary and benefits for Deacons 42a. Total amount paid to/for Pastor for Housing 42b. Total amount paid to/for associate or any other appointed Clergy for Housing 42c. Housing for Deacons NOT included in 42b 43. Total amount paid to/for Pastor and Associates for ARP 44. Total amount paid to/for pastor and associate for any other cash allowances (Non-Accountable) 45. Total amount paid in salary and benefits for all other church staff 46. Total amount spent for local church program expense 47. Total amount spent for other local church operating expenses

$5,796 $40,000

$0 $0 $6,000 $0 $0 $5,000 $0

$5,000 $20,000 $20,000

Total Adjusted Church Expenditures (sum of lines listed above)

3 Year Average Adjusted Church Expenditures (current year total added to previous 2 years' totals and divided by 3)

$101,796 $100,200

2021 Conference Budget apportioned across all local churches Total Adjusted Average Expenditures of all local Churches Apportionment Rate (Conference Budget divided by Total Adjusted Average)

Local Church Apportionment (Apportionment Rate multiplied by 3 Year Average Adjusted Church Expenditures to the nearest dollar)

$12,877,355 $37,586,651

$0.3426

$34,329

For each dollar of expenditures, church is apportioned approximately $0.34 for Fair Share

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Local Church Tax Reporting Requirements

I. PAYROLL TAXES FOR EMPLOYERS

A. Withhold taxes on employees, file forms, and comply with deposit requirements 1. Federal Social Security (NO CLERGY WITHHOLDING)

2. Federal Income Tax (NO REQUIRED CLERGY WITHOLDING). At the request of the clergy, the employer may withhold income tax for that clergy, pursuant to a Form W-4 and state equivalent of federal W-4 (WV/IT-104). (Retain all tax withholding document).

3. State income tax withholding (requirements vary from state to state)

There is no mandatory federal income tax withholding for clergy; income tax withholding can be done at clergy request, Social Security is never to be withheld for clergy.

B. Quarterly Filing Requirements (April 30, July 31, October 31 and January 31 for the first, second, third and fourth quarters) 1. Form 941-Federal

2. State equivalent form (may vary from state to state)

See separate memo on information for filing federal Form 941- clergy compensation shown on 941 but no information on Social Security and Medicare wages and withholding.

C. Annual Filing Requirements 1. Form W-2 must be given to employees by January 31

2. Form W-3 must be filed by January 31 (NOTE: W-2 and W-3 filings can be made electronically in some cases. See the Social Security Administration website at for more details.)

3. State equivalent or other requirements vary from state to state

II. FILING REQUIREMENTS FOR PAYMENTS TO SELF-EMPLOYED INDIVIDUALS (Such as independent contractors supplying repair or other services to the church)

A. January 31: File a 1099-MISC. for individuals who receive compensation in excess of $600 B. January 31: File a 1099-MISC. if reporting amount in Box 7 C. February 28: File Form 1096 with the IRS together with all other 1099-MISC forms.

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FORM 941 FILING REQUIREMENTS

Internal Revenue Service Form 941 is the Employer's Quarterly Federal Tax Return. The first report for the year must be filed by April 30 (for pay period ending March 31). Subsequent filing dates are July 31, October 31, and January 31. Form 941 reports the number of employees, the amount of social security and Medicare wages and taxes as well as the income taxes which are withheld in each quarterly period. If you currently have an employee(s) you have already been filing the 941 form.

It is the position of the Internal Revenue Service that a church which has only a minister (and no other staff) need not file a 941 form. If the minister should file a W-4 form, electing to have voluntary income tax withholding, the 941 form is required. Any amounts withheld are reported as income tax on Line 3.

You can obtain an original 941 form as well as the Instructions for Form 941 from your local IRS office, the IRS website, , or by contacting the IRS at 1-800-829-3676 (1-800-TAX-FORM) and ask them to mail copies to you.

Line 1 is for the number of the employees.

Line 2 is for the total amount of wages, tips and other compensation paid to all employees during that quarter. The total compensation should not include salary reduction pension contribution, any housing or utility allowance, or accountable reimbursement plan payments. Health insurance premiums which are paid by the church through the Conference provided health insurance plan are also excluded. Travel or other allowances are includable as income.

For lines 5a-5c there is no information reported for clergy as the church may not do any Social Security or Medicare withholding on behalf of those employees. Because of specific Code provisions, clergy are always considered self-employed for social security taxes. If there is no other staff withholding, these boxes should be left blank.

The box in line 4 should not be checked. (Unless you have filed IRS Form 4029 to exempt all employees from Social Security.)

Questions have arisen about whether the IRS will be concerned that Social Security and Medicare taxes withheld on lines 5a-5c (which must not include any withholding for clergy) are inconsistent with the compensation paid (which does include clergy salary). IRS officials in Washington, DC have indicated that IRS computer should not identify these disparities. However, should such an inquiry arise, you might try noting that clergy are considered selfemployed for Social Security taxes for services performed in the exercise of ministry under Internal Revenue Code ?312(b)(8)(A). IRS publication 517 Social Security and Other Information for Members of the Clergy and Religious Workers states, "Because of statutory law, you are considered a self-employed individual in performing your ministerial serves for Social Security tax purposes."

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