Clergy Tax Training Overview

Introduction

• Presented by: Jeff Fosbasil, Conference Treasurer
• Target Audience: New pastors in the Dakotas Conference, UMC
• Purpose: Address tax challenges for ordained pastors
• Quote: Will Rogers on income taxes making liars out of people due to complexity

Goals

1. Increase awareness of clergy tax challenges
2. Learn practical tax tips and strategies
3. Spend appropriate time addressing tax issues to avoid stress

Key Topics

1. Confusing Nature of Clergy Taxes

• Albert Einstein: "Income tax is the hardest thing to understand."
• CPA Challenges: Many CPAs are not familiar with clergy-specific tax issues.
• Question: Are pastors employees or self-employed?
  • Answer: Both. IRS considers pastors employees (receive W-2), but for Social Security, they are self-employed (file Schedule SE).

2. Making Tax Payments

• Withholding vs. Quarterly Payments:
  • Most pastors make quarterly estimated payments.
  • Recommendation: Have taxes withheld to simplify process.

3. Housing and Taxation

• Parsonage and Cash Housing Allowance:
  • Not taxable for income tax but taxable for self-employment purposes.
  • Use Zillow values for estimating fair rental value.

4. Clergy Compensation Form

• Purpose: Outline compensation package and assist treasurers.
• Key Sections:
  • Designated Housing Exclusion: Important for unreimbursed housing-related expenses.
  • Health Insurance Related Salary Reduction: Use for health savings and reimbursements.
  • UMPIP Contributions: Retirement savings options (before tax, Roth, etc.).

5. Practical Tax Management

• Treasurer Collaboration: Provide them with your Clergy Compensation Form.
• Documentation System: Develop a system that works for you for storing tax documents and receipts.

6. Housing Expense Documentation

• Types of Expenses:
  • Mortgage, property insurance, utilities, furnishings, maintenance, etc.

7. Miscellaneous Tax Considerations

• Moving Expenses: No longer deductible; taxable if reimbursed.
• Educational Assistance: Churches can help pay student loans tax-free via Section 127 plan.

8. Estimated Tax Payments

• Quarterly Deadlines: Sept 15, Jan 15, Apr 15, Jun 15
• Importance of Planning: Avoid large payments by planning ahead.

Final Recommendations

• Professional Help:
  • Seek out clergy tax professionals.
  • Verify their experience with United Methodist clergy taxes.
• Resources:
  • Use available online resources and tools like the clergy tax estimator.

Conclusion

• Contact: Reach out to Jeff Fosbasil for additional questions.
• Encouragement: Get started on tax preparation early to avoid stress.