For a Smooth Tax Season Start Clergy Tax Preparation Early

As the end of the year approaches, so do thoughts of the upcoming tax season. In order for 2012 taxes to go smoothly, it often behooves us to start thinking and preparing for tax time before the year is over. This is especially true for church clergy. They have an array of interesting and complex tax issues that they need to decipher before tax season so it is often suggested that they start early on their taxes.

When it comes to clergy taxes, it’s important to keep good records of all business related expenses throughout the year. Rather than struggling to pull together all of your necessary information right before tax time, keep good records throughout the year. This consists of all receipts, cancelled checks and letters from organizations in regards to tax or financial related matters.

At the beginning of any new tax year it’s important that clergy men and women understand their salary in regards to IRS regulations. Negotiation of annual changes or new employment should be considered to take advantage of clergy tax laws. The church congregation should also divide their clergy’s total compensation into tax advantaged and non-tax advantaged categories. During the year, estimated federal tax payments should be made to the federal government. Clergymen should also be reimbursed throughout the year for anything considered a “professional accountable reimbursement”. This includes conferences, books, education, mileage or any other work related expenses.  It’s also important to understand how the federal government considers clergy both an employee and self-employed. For the purposes of paying federal income tax, clergy are considered employees, but are considered self-employed for the purposes of Social Security tax. Therefore submitting deductions as an employee for items normally only allowed by self-employed may result in an IRS tax audit. 

At the end of the year, clergy are encouraged to pay local and state taxes before the end of the year.  Other matters to take care of at the end of the year include selling losing stock to offset any income gains, make charitable contributions, add to retirement accounts, take advantage of authorized medical deductions and compare actual expenses to maximum allowable expenses, and keep track of all household expenses as well.

When it comes to clergy taxes, it’s recommended that clergymen hire a tax preparation professional to help them with their 2012 taxes. But by starting early and by keeping a tab on their tax situation throughout the year, members of the clergy can have a smooth tax season.

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Sarah Wozniak

Staff Writer, Page1 Online Marketing