5 New Year's Resolutions for Tax Exempt Organizations

As we continue to make effective plans for an awesome 2018 work year, we wanted to share some New Year’s Resolutions with you that could greatly benefit your nonprofit organization. 

New Year’s Resolutions

1) Better Money Management

Gaining necessary funds to adequately run your nonprofit organization can be a challenge. Make every effort you can to closely manage the funds of your organization to maximize its usage and allocate accordingly for the fiscal year. 

2) Increase Your Social Media Presence

The world that we live in today is extremely driven by social media. Take advantage of this easy, free, and trendy method of communication! Having your nonprofit active on social media can increase your audience and interact with current and potential donors, supporters, and volunteers more frequently. 

Social media platforms such as Facebook, Instagram, Twitter, LinkedIn, and Reddit are great to use. YouTube is also another way to promote your organization and its activities.

3) Revamp Your Organization’s Correspondence

This is actually one of the easiest resolutions to tackle. Instead of sending out the same generic correspondence each year, simply create something new! Rewrite your “thank you message,” website content, etc., to attract the attention of the reader. 

4) Redefine Your Target Audience 

In your upcoming team/staff meeting, take a few moments to analyze the mission of your organization and determine which audience(s) you should target this year. 

Having more than one target audience is okay!

5) Become Mobile-Friendly

With 9 of 10 American adults owning a mobile phone of some kind, it is extremely important that your website is mobile-friendly.

Mobile-friendly sites are very effective and useful for informing others about your organization and increasing online donations.

You Can Do It

While New Year’s resolutions require effort and dedication, these 5 resolutions can easily be accomplished by your organization during 2018. As always, the ExpressTaxExempt team is here to help you as much as possible. 

We’re just a phone call, email, or chat away if you ever have any questions or need assistance during any part of the e-filing process. 

Feel free to contact our support team of e-file experts at 704.839.2321, Monday through Friday from 9 a.m. to 6 p.m. EST. You can also reach us 24/7 via email with support@ExpressTaxExempt.com.

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Blessings on Blessings: The 411 on Earnings For Clergy

A familiar passage of scripture found in Luke 6:38 says: “Give, and it shall be given unto you; good measure, pressed down, and shaken together, and running over, shall men give unto your bosom…”

Although financial blessings are greatly appreciated by all mankind, men and women of the cloth should take some precautionary measures when accepting monies for their ministerial services.

Licensed, Commissioned, or Ordained ministers are considered to be common law employees of a church, employed to provide ministerial services.

Some exceptions to this classification are made to those such as traveling evangelists who are self-employed under the common law.

As a minister that performs ministerial services, all earnings, including wages, offerings, and fees received for performing marriages, baptisms, funerals, etc., are subject to income tax, whether the amount was earned as an employee or self-employed person. The way you treat these expenses (related to these earnings) differs if you earn the income as an employee or as a self-employed person.

Church Employee vs. Self-Employed

Generally, clergy is considered to be an employee if the church or organization has the legal right to control what the clergy does and how they do it, even if there is considerable discretion and freedom of action provided.

As a minister, if a congregation employs you with a salary, you are generally a common-law employee of the congregation and your salary is considered wages for income tax that can be withheld.

Amounts of money received directly from members of the congregation, including fees for performing marriages, baptisms, or other personal services, are generally earnings from self-employment for income tax purposes.

NOTE: The salary you receive from a congregation and fees received from members of a congregation are subject to self-employment tax.  

Social Security/Medicare

Regardless of a clergy’s status under common law, ministerial services performed by clergy are considered self-employment earnings and are generally subject to self-employment tax.

Deductions

If you plan to itemize your deductions when filing, you may be able to deduct certain unreimbursed business expenses that are related to your services as a common-law employee on Form 1040, Schedule A (Itemized Deductions). Other forms that you could utilize when filing are:

• Form 2106 (Employee Business Expenses)
• Form 1040, Schedule C (Profit or Loss From Business - Sole Proprietorship)
• This form is used if you are reporting self-employment income such as offerings or fees received for performing marriages, baptisms, funerals, etc.)
• Form 1040, Schedule C-EZ (Net Profit From Business - Sole Proprietorship)

Housing For Clergy

Minister’s who have been provided a parsonage (home) may exclude the fair rental value of the home, including utilities. Please note that the amount excluded cannot be more than reasonable compensation for the minister’s services.

Also, minister’s who receive a housing allowance may exclude the allowance from gross income to the extent that it is used to pay expenses in providing a home. The amount excluded cannot be more than the compensation of the minister’s services.

If a minister owns their own home, deductions can still be claimed for mortgage interest and real property taxes. If the housing allowance exceeds the lesser of the reasonable compensation, the fair rental value of the home, or actual expenses, it must be included in the amount of the excess in income.  

NOTE: The minister's employing organization must officially designate the allowance as a housing allowance before paying it to the minister. Also, the fair rental value of a parsonage or the housing allowance is excludable only for income tax purposes. The minister must include the amount for self-employment tax purposes.

Exemption from Self-Employment Tax:

GIF via GIPHY

Did you know that clergy could request exemption from self-employment tax?

Yes, ministers can request an exemption from self-employment tax for their ministerial earnings, if they are opposed to certain public insurance for religious reasons. Exemption can NOT be requested for economic reasons.

In order to request this exemption, one must file Form 4361 (Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners).  This form must be filed by the due date of the minster’s income tax return (including extensions) for the second tax year that the minister has net earnings from self-employment of at least $400.

Moving Forward

As you continue to do the work of the Lord and make a difference in the lives of others daily, remove the burden of having to figure out how to file your taxes. With ExpressTaxExempt, we provide a simplified e-filing process that will suit all of your filing needs. Visit our website and save even more money when you e-file with our recently reduced filing rates! We’re available to assist you via phone at 704.839.2321 on Monday through Friday from 9 a.m. to 6 p.m. EST or reach out to us 24/7 via email at support@ExpressTaxExempt.com.

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New Leadership? No Problem: Organizational Leadership Transition Tips

As we ease into the month of July, some organizations are embracing [or planning to elect] new leadership to continue carrying out the work of their group. Good leaders strive to leave their organization in good standing and provide future leaders with ample information to ensure a smooth transition. While some organizations in this predicament may have a transition method in place to train new leaders, there are others that may need or want to implement some useful strategies to ensure the core leadership of their group remains solid.

Major things such as annual tax filing due dates, record keeping, or maintaining tax-exempt status cannot afford to “fall by the wayside” during each transition of leadership.

At ExpressTaxExempt, we realize that your mission is to help others, so now, let us help you! Here are some leadership transition tips that could be beneficial to your organization:

TRANSITION CHECKLIST

Get Organized - Prior to new leaders beginning their term, try your best to make sure things are organized so that leaders can focus on their duties without having to go against any unnecessary roadblocks.

Leadership Transition Binder - A great tool and gift to incoming leaders is to provide them with a binder that has all of the documents they need to be successful in their new leadership role. They will reference these items throughout their tenure, so make sure they are detailed and organized.

• *Each binder should have general “must-haves” like the organization’s bylaws, calendar of events, etc., as well as specific documents that would be helpful to the individual and their position. For example, the organization’s treasurer or director of finance should receive information like previous financial records, state tax forms/info, tax filing information (EIN/Tax ID#, bank account information, pending significant financial transactions, fundraising information) and more.

-Discuss Organization’s Policies & Procedures

-Set realistic goals and objectives for the year
-Go over each leader’s duties in detail. Explain what they are and are not responsible for.  
-Inform New Leaders of Key External Relationships

• *For leadership roles that require working relationships with other leaders outside of the organization, a Contact Sheet should be provided with contact information (name, title, email address, phone number) for each individual. 

With these useful tools and tips, your leadership team should be on the road to success as they continue to carry out the great work that your organization does from day to day. Be sure to keep your tax-exempt status by annually filing with ExpressTaxExempt. Unsure of your filing deadline? We have a Fiscal Tax Year Filing Calendar available for you to take advantage of. Enjoy your summer and feel free to comment with any other leadership transition tips and we’ll add them in!

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Intangible Religious Benefits from Charitable Contributions

The IRS has rules of recordkeeping and substantiation for donors giving charitable contributions along with disclosure rules for charities receiving those donations. Individuals or groups that donate to exempt organizations can typically write-off those tax-deductible donations on their annual return; however, there are a few other things required.

Deduction Requirements from Contributions

Donors must obtain a bank record or written receipt from the organization for any monetary contributions to claim the amount on their federal income tax returns. A written acknowledgment is also mandatory for any single contribution of $250 - cash or noncash - given to a nonprofit or charity. And charitable organizations should provide written proof to donors who receive over $75 of goods or services in return for the contribution.

Goods and Services
Written acknowledgments for goods and services exchanged for donations must contain a description of what the organization provided and an estimated monetary value of items or services given to the donor. Contributors should also subtract the estimated amount from the total fair market value of the donation to know the deduction value. Goods and services typically include cash, benefits, property, services, or privileges. There are exceptions - one of which is intangible religious benefits.

Intangible Religious Benefits
The IRS does not require a description or value of goods included with a written acknowledgment from faith-based organizations that only provide intangible religious benefits to donors. The statement needs only to say the organization provided such benefits. A tax-exempt organization operating exclusively for religious purposes can only grant this type of benefit; it’s usually something that you can't sell as a consumer transaction.

Examples of intangible religious benefits include admission to religious ceremonies or a de minimis tangible benefit such as wine used for religious services. Benefits that the IRS doesn’t consider intangible or faith-based include education towards a recognized degree, consumer goods, or travel services.

Religious organizations, such as churches, don’t typically need to file annual 990 returns with the IRS. But if they choose to do so, they must submit a complete return which may require a Schedule B for contributions equal to or greater than $1,000 and were used exclusively for religious purposes. You should also list donations used outside of religious purposes that are over $5,000.

If you have any questions regarding substantiation and disclosure requirements or about intangible religious benefits, we recommend seeking a tax professional for assistance. You can inquire about Schedule B and Form 990 information by calling the IRS Tax-Exempt Hotline at 877.829.5500.

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Can Religious Organizations Become Tax-Exempt?

In Section 501(c)(3) of the Internal Revenue Code, one of the exempt purposes that is specified is “religious.” Because of constitutional issues, Treasury Regulation doesn't have a precise definition of "religious" like other functions such as charitable, educational, or scientific.

According to the IRS, the First Amendment typically prohibits the Internal Revenue Service from judging what can or cannot be a religion. As far as tax-exempt groups are concerned, the IRS lists the following as 501(c)(3) religious organizations:

• Churches
• Nondenominational ministries
• Integrated auxiliaries of churches
• Conventions and associations of churches
• Interdenominational and ecumenical organizations
• Other entities with the principal purpose of studying or advancing religion

The IRS also grants 501(c)(3) exemption status for religious organizations that primarily participates in the following activities:

• Distributing a newspaper devoted to religious news, articles, or editorials
• Organizing religious retreats for diverse Christian denominations where members use recreational facilities for limited amount of time and free of charge

Because 501(c)(3) regulations state that organizations must operate exclusively for one or more exempt purposes, it is possible for religious groups to not qualify for exemption status if they significantly endorse a nonexempt purpose. For instance, the following activities can cause a religious organization to be ineligible for tax exempt status:

• Producing literature for profit that has little to no connection with the religious beliefs of the organization
• Conducting a religious retreat facility that caters to recreational and social activities rather than religious

It’s also common for organizations to have activities to serve more than just one purpose. For religious groups, they can also qualify for 501(c)(3) status as an organization operating primarily for educational or charitable purposes.

Churches are typically different from other types of religious organizations - the federal government automatically recognizes them as tax-exempt without reviewing a Form 1023. But there are various conditions that the IRS considers when determining a church for federal tax purposes. These are, but not limited to

• An established place of worship
• A formal code of doctrine and discipline
• A recognized belief and form of worship
• A regular congregation of religious services
• A distinct legal existence of the organization
• An organization comprised of ordained ministers
• A precise and accurate clerical government and religious history
• A membership system exclusive of any other churches or denomination

Like many other tax-exempt organizations, the IRS still requires churches to follow standard 501(c)(3) regulations such as no private inurement and no significant lobbying. The main difference between churches and other tax-exempt groups is that churches are not required to file an annual 990 form. For churches that choose to submit a nonprofit tax return, your gross receipts will determine which 990 form to file.

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Form 990 for Churches

What’s the deal with churches and Form 990?

We’re gonna run you through the basics. Try to keep up, there’s a quiz afterward!

Churches and Associations of Churches

Small tax-exempt organizations that have less than or equal to $50,000 gross receipts are required to file a Form 990-N (e-Postcard) every year. You know this already.

But there are exceptions to this rule. For example, churches, their integrated auxiliaries, and conventions or associations of churches aren’t required to file.

Affiliation with the Churches

In order for an exemption to remain, your church has to have the majority control or be the majority financial supporter of its integrated auxiliaries’ governance.

If your church financially invests only 25% into an auxiliary group, that program or group will still have to annually file if they want a tax-exempt status.

It doesn’t matter that program or group is in direct affiliation with your church.

Integrated Auxiliaries

In the IRS Publication 1828, Churches and Religious Organizations (PDF link), you can find information about an integrated auxiliary of a church.

What you’ll want to find is how affiliation can be recognized by the IRS through facts and circumstances other than a church's majority control over the auxiliary's governing body.

Unrelated Business Income

For most organizations, an activity is an unrelated business, and subject to unrelated business income tax, if it meets three requirements: It is a trade or business, it is regularly carried on, and it is not substantially related to furthering the exempt purpose of the organization.

Filing Requirements & Group Returns

If it is required to file an annual return, the organization must file its own separate return but may also file a group return on behalf of some or all of its subordinates.

What is a group exemption? It allows the central or parent organization to confirm that its subordinates are eligible for exemption and to include each subordinate under its cover for tax-exempt purposes.

Ready for the quiz? Well, we’ll let you off easy this time.

If you have any questions, call our e-filing experts at 704.839.2321.

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Form 990-N & The Church

Alloweth the congregation to gather; thither is news to beest spread throughout the land. From the booketh of the IRS, thither art rules governing the church as a small organization. No needeth to receiveth the fires and pitchforks or shelter the livestock. The church wilt remain as right as rain. For the church, mine brothers and sisters, is an exception from the rule. As listed in the booketh of… *sighs deeply*

Is reading Shakespearean English as exhausting as creating it? To be able to read, write, and speak like that on a regular basis takes incredible skill… or an unholy amount of practice.

Form 990-N (e-Postcard)
To get back on track, small tax-exempt organizations that have gross receipts less than or equal to $50,000 are required to file a Form 990-N (e-Postcard) every year. You know this already. But there are exceptions to this rule, one being that churches, their integrated auxiliaries, and conventions or associations of churches aren’t required to file.

“Churches are completely exempt from filing?”
Well, yes and no. It’s a resounding, choir-enthused “Yes” if you’re talking about a single church that’s doing activities that are in compliance with its mission. But, if you’re a church leader, you’ll want to be aware of any ministries or organizations related to your church that may need to comply with the annual filing.

Specialists advise that it’s the “integrated auxiliaries” stipulation that churches should be aware of. Typically, integrated auxiliaries are things like seminaries, women's auxiliaries, and schools.

“What does that mean for the church?”
Your church has to have the majority control or be the majority financial supporter of its integrated auxiliaries’ governance in order for the exemption to remain. For instance, if your church financially invests only 25% into a school program or a group, that program or group will still have to annually file if they want a tax-exempt status. It doesn’t matter that program or group is in direct affiliation with your church.

Determining Integrated Auxiliary Status
In the IRS Publication 1828, Churches and Religious Organizations, you can find information about an integrated auxiliary of a church. What you’ll want to find is how affiliation can be recognized by the IRS through facts and circumstances other than a church's majority control over the auxiliary's governing body.

If you find that tax-exempt organizations affiliated with your church still need to file, then it would be best to file on time depending on the organization’s tax end date.

So, in a true Shakespearean fashion, guide thine shining light and beest an example for thy brothers and sisters by quickly and easily e-filing your Form 990-N (e-Postcard) with Express990.
It’s FREE to e-file for the current year and can take less than ten minutes to complete and transmit to the IRS.


For assistance with e-filing your Form 990-N (e-Postcard), Express990 offers expert customer support to help. Feel free to contact a professional at our Rock Hill, South Carolina office. Live assistance is available at 704.839.2321 from 9am - 6pm Eastern Standard Time, Monday through Friday. Email support at support@expresstaxexempt.com is available 24 hours a day including weekends and holidays or you can chat with us live at Express990.com

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