What is minister
tax prep? First, it involves understanding the various special
tax privileges available to ministry personnel under the
Internal Revenue Code. For example, you must intimately
understand the housing allowance and parsonage rules. There is
much to know about this aspect of "minister
tax prep." But for the purposes of this brief review, we
tackle where it all begins... the designation.
What are some of the matters that a designation
should address? The following
examples of what a resolution
should contain.
First, there should be a reference to the
authority for the designation, namely the
Internal Revenue Code, and specifically, section
107. Indicate that you know what it requires by
including the section's language.
Second, there must be an indication that the
recipient of the designation is actually
compensated by the church exclusively for
services as a minister of the gospel. It doesn't
count if the minister is compensated for
non-ministry teaching or consulting, for
example.
Third, if a church-owned parsonage is involved,
you must indicate that. Keep in mind that this
will require including additional language
relating to the additional compensation the
minister will receive along with the parsonage.
If a parsonage is not involved, state that as
well.
And fourth, state the minister's specific annual
compensation and the specific amount of the
designation. Also, make sure you indicate the
year for which the designation is made.
Of course, this is just the beginning of
assisting clergy with
minister tax prep issues. But you can't go
wrong if you know where to get your expert
information.
If you're starting, or completing, a church...
you have to know this area of taxation. For the
gold standard in use today by start-up churches,
check out
