Important Tax Updates for Church Leaders
In the spirit of being “wise as foxes”, please check out these updates below so that your church remains above reproach and “renders appropriately unto Caesar.” Be sure to forward this information to the leaders handling administrative or business matters for you.
Parking spaces – stop reserving to avoid or minimize new IRS tax:
If your church (or ministry) reserves parking spaces for any employees, the church may be subject to a new 21% income tax to be reported and paid to the IRS on 2018 Form 990-T. Your church can avoid or minimize the potential of being taxed for parking spaces by removing reserved parking spaces for any employee by March 31, 2019.
This is part of a largely unnoticed provision in the 2017 Tax Cuts and Jobs Act passed late last year. The IRS issued new guidance earlier this month in Notice 2018-99. For more information, check out this ECFA article: http://www.ecfa.org/Content/Nonprofit-Employee-Parking-Tax-Latest-Developments
Moving expense reimbursement – no longer a tax free benefit:
In prior years, when a church (or ministry) hired staff from out of the area, the church was able to reimburse moving expenses of the new staff person. Beginning in 2018, these reimbursements will now be subject to tax as wages. Remember to include these costs in box 1 on 2018 Form W-2. Employees will also not be able to deduct them on their personal tax returns.
Unreimbursed business expenses not deductible in 2018:
Beginning in 2018, unreimbursed business expenses of employees will no longer be deductible on their personal income tax returns. For instance, if your Kid’s Director purchased extra materials for Vacation Bible School out of their own pocket, and wasn’t reimbursed for it, they could have received a deduction for it in past years…but no longer. This may be a great time to consider restructuring your church’s compensation and reimbursement policy to include an accountable reimbursement plan. Lastly, pastors may still be able to deduct these expenses for purposes of calculating their self-employment tax liability.
IRS standard business mileage rate for 2019:
The IRS standard mileage rate for business use of a car will increase to $.58 per business mile driven in 2019.
For Washington State Churches Only – Paid Family & Medical Leave Act Update:
Starting in 2020, Washington State will offer paid family and medical leave benefits to workers, including church staff, under the Washington Paid Family and Medical Leave (PFML) program. PFML will be funded by premiums paid by both employees and employers starting January 1, 2019. The premium will be 0.4% of gross wages, paid each quarter starting in 2019. The employer share will be about 37% of the premium with employees picking up the remaining 63%. Pastor gross wages include housing allowance. For example, if an employee’s pretax wages are $50,000 per year, the employee portion will be approximately $2.44 per week. Please notify all church staff about this new payroll deduction. For churches located outside of Washington State, you have yet another blessing in which to be thankful for.
This feels like a blog post written by “The Grinch”…Merry Christmas y’all!
Upright – Building Churches with Integrity is a 2-day conference sponsored by Sojourn Network and Summit Church to be held in Fort Myers, FL on Wednesday & Thursday, January 30-31, 2019.
TIM BELTZ is the former executive pastor of Sojourn Community Church, a multi-site church in the Louisville, KY area. Previously, he served as the executive pastor of Mars Hill Church in Seattle from 2007 to 2010 helping grow the church from three to twelve campuses across four states during that span. Tim is the founder and principal of 10 Talents Consulting. He continues to pastor at Summit Church in Naples, Florida overseeing Strategic Initiatives and serve on the Sojourn Network Board of Directors.