Guidestone Financial Resources of the Southern Baptist Convention (formerly The Annuity Board of the Southern Baptist Convention) offers an excellent tax guide for ministers. Entitled Ministerial Tax Issues, it provides guidance on how to account for housing allowance expenses, the impact of accountable and non-accountable reimbursement plans by the church, and the tax implications of being a dual tax status employee.
The Minister's Tax Guide discusses basic tax issues and gives comprehensive examples of a minister's tax return. In addition, it has a special section entitled Important federal requirements for churches. This offers very valuable information to churches on what to include on a pastor's W2 as wages; how and what to withhold on pastors and other church employees,(there is a crucial difference); making tax deposits, filing W2s, and substantiating charitable contributions. We highly recommend every pastor and church have a copy of these guides. You may download these publications in parts or in their entirety directly from their website.
Ministers also should be aware of the Deason Allocation rule when computing their deductible portion of unreimbursed employee business expenses. If a minister also has income as a minister other than as an employee, he needs to apply the Deason allocation rule to those expenses as well. For a consultation, please call us at 704-481-0223.
Church Law & Tax Report publishes a must-have resource for all churches. Entitled CHURCH & CLERGY TAX GUIDE by Richard R. Hammar,J.D.,LL.M.,CPA, this book not only covers tax issues for ministers and pastors, it covers legal issues faced by churches. For pastors, it has excellent discussions on how and how much the church can designate as a housing allowance, what qualifies as housing allowance expenses, and the limitations of a housing allowance exclusion on the pastor's return. (The housing allowance excluded from federal taxable income is the lowest amount of three separate computations.)
Other chapters in the book deal with church reporting requirements, taxation of churches, and tax exemption requirements. It has valuable information on how to handle designated offerings within the church, how to handle benevolence funds,and how to substantiate contributions. It also includes recent court decisions and IRS rulings involving churches. Every church or pastor should have its own copy of this book. You can order it directly from Christian Ministry Resources by calling 1-800-222-1840 or ordering it from their website.