2012 Year-end IRS Regulations
for the Church
What You Need to Know;
What You Need to Do
Copyright 2012
Year-end IRS Regulations
Why Worry about the IRS?
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No longer a church friendly government
Government is broke
We are low hanging fruit
Loss of 501c(3) status
Fines
Obey the Law
Year-end IRS Regulations
Print out Year-end Contribution
Statements and Mail Them
• Statements must have the Statement on them
• NO goods or services were provided by the
organization in return for the contribution
• IRS can deny the deduction if the statement is
not on the Contribution form
Have Employees fill out
Annually…
 HSA/HRA/FSA insurance form if high
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deductible insurance is offered
Dental form if dental insurance if offered
Salary Reduction form for 401K or 403B
retirement plans
Housing Allowance form (ministers only)
Strongly recommend a new W-4
Take Advantage of the New
Limits!
About those I-9’s
 I-9 must be filled out by all employees and filed
separately from employee file
 All employees (new employees and those hired
since Nov. 6, 1986) must fill out section one of
Form I-9 and churches must fill out section two
 Do not file Form I-9 with U.S. Immigrations and Customs
Enforcement (ICE) or USCIS. Form I-9 must be kept by the
employer either for three years after the date of hire or
for one year after employment is terminated, whichever
is later. The form must be available for inspection by
authorized U.S. Government officials (e.g., Department
of Homeland Security, Department of Labor, Office of
Special Counsel).
Depositing Withheld Taxes
 Three types of taxes collected: Income taxes,
employee’s FICA, employer’s FICA
 Taxes paid monthly if taxes are $50,000 or less
in the lookback period
 Taxes paid bi-weekly if taxes are more than
$50,000
 See IRS Publication 15- download a new one
Form 941 – A Must
 Filed Quarterly on the last day of the month
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and can be filed electronically
Use the 941X if you make a mistake
Done even if you only have ministerial staff
Taxes less than $2,500 are sent with form 944
at year end-be timely in payment:
For 2013: If you estimate your taxes will be
less than $1,000 you may contact the IRS and
request to use the 944 form. See document.
W-2 and W-3
 W-3 is Transmittal form for W-2’s
W-2’s – Fixing Mistakes
 W-2c if you make a mistake
 W-3c if you make a mistake on the W-3
W-3 Boxes
X
X
W-2 Preparation
W-2 Preparation
IRS form 4361
 Regarding Ministers who opted out of
Social Security
 They can require that you produce it in the
future
 They are now doing so
 Penalties can be severe if you cannot
produce it
1099 MISC
 Issued to self-employed for income tax or non
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employees. Issued if paid more than $600
annually
Not needed for a corporation or for anyone
who will receive a W-2 from another employer
for work done
Name, address and SS needed before 1099
can be issued. Get the info before payment is
made and have them fill out a W-9
1099 is corrected by reissue with the box at
the top mark checked
1096 is the Transmittal form for 1099 misc
Form DE-542 (CA)–
Independent Contractors
 WHO MUST REPORT:
 Any business or government entity (defined as a
“Service-Recipient”) that is required to file a Federal
Form 1099-MISC for service performed by an
independent contractor (defined as a “Service-
Provider”) must report. You must report to the
Employment Development Department within twenty
(20) days of EITHER making payments of $600 or more
OR entering into a contract for $600 or more with an
independent contractor in any calendar year, whichever
is earlier. This information is used to assist state and
county agencies in locating parents who are delinquent
in their child support obligations.
DE-1NP (CA)– Employment form
for Non-Profits
 An employer is required by law to file a
registration form with the Employment
Development Department (EDD) within
fifteen (15) calendar days after paying
over $100 in wages for employment in a
calendar quarter, or whenever a change
in ownership occurs.
DE-34 (CA) - REPORT OF NEW
EMPLOYEE(S)
 WHO MUST BE REPORTED:
 Federal law requires all employers to report all newly
hired or rehired workers to EDD within 20 days of
their start-of-work date. State and county agencies
use this information to assist them in locating parents
who are delinquent in their child support obligations.
 An individual is considered a new hire on the first day
in which he/she performs services for wages. An
individual is considered a rehire if the
employer/employee relationship has ended and the
returning individual is required to submit a W-4 form
to the employer.
DE-9 (CA) - Quarterly Wage &
With - holding Report
 Can be done online at www.edd.ca.gov
 State version of IRS 941
 DE-9C Employee Information
 Both must be sent in each Quarter
DE-7 (CA) - Annual
Reconciliation Report
 You can get assistance at 1-888-745-3886
No Longer Done!
Franchise Tax
 Every church or ministry that incorporates in the
state of California has to pay a minimum tax of
$800.00 per year unless the church or ministry
files for an exemption. The exemption is not
automatic!
 Churches get these notices because they never
filed for the exemption. In order to apply for the
exemption, you need to file Form FTB-3500 or
FTB-3500A. If you have recently incorporated
(within the last 4 years), and have not filed for the
exemption, we encourage you to do it
immediately.
Withholding on Out of State
Guest Speakers
 California requires all churches and ministries to
withhold 7% of all honorariums over $1,500.00
paid to guest speakers that live outside the state
 Report to the state on form 592-B the amount of
earnings and the amount of withholdings.
 Beginning January 1st, 2010 the limit is
$600.00. Therefore, it may be safer to
automatically withhold the 7%. The penalty for
not withholding is at least 10% of the entire
honorarium. This is a penalty against the church.
Excise taxes
 If a church in California purchases something from
an out of state vendor, the church is usually not
charged sales tax because the vendor is from
another state. However, in California tax code
165.0014 excise taxes are to be imposed upon
churches and religious organizations that
purchase tangible personal property from out-ofstate sellers for use in California.
 FORM 401-DS by January 31st of each year
 When the church gets products and begins to use
them, it is required to report the purchase and
pay an excise tax equal to the regular California
sales tax.
Unrelated Business Incme
 Any income that does not match the
purpose of the church
 Cell tower income, etc
 File a 990T
 Does not apply to churches renting your
facilities to hold church – same type of
business
Statement of Information
 Updates your church office address
 Updates your Principal Officers; Pastor (CEO),
Secretary, Chief Financial Officer (Treasurer in
small church)
 Must be done biennially
http://www.sos.ca.gov/business/corp/pdf/so/corp_so100.p
df
 No cost
 Penalty for not doing so: possible Corporate
Status Suspension
 To see your status: http://kepler.sos.ca.gov/
Other Federal Requirements
 All cash donations less than $250 must be
substantiated by either bank record (canceled
check) or written communication from the charity
 All donations over $250 must be substantiated by
written communication from the charity with
name of donor on statement
 Property over $250 in value must have description
Other Federal Requirements
 Gifts in excess of $5,000 must be appraised by an
accredited appraiser and IRS form 8283 must be
used to document the gift. Donation is the sale
price.
 Receipt should not list value of the gift
 Donee (church) must keep sufficient records to
validate gift-form 8282
 Receipt must be given no later than date of
donation or tax return due date
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Additional Helps
 Toll free (866) 455-7438 for help with W-2, W-3,
1096, 1099
 Order IRS forms from 1-800-829-3676 or
http://www.irs.gov/businesses/page/0,,id=23108,
00.html
 EDD forms
http://www.edd.ca.gov/Forms/default.asp
 http://www.stayexempt.irs.gov/
Where Do I Get the Forms?
 Post office
 Library
 IRS – mail
 Also helpful: All publications to stay on top of
tax laws
http://www.irs.gov/app/picklist/list/formsPublications.html
 Additional help from GuideStone
http://www.guidestone.org/MinistryTools/~/media/GuideStone
%20Corporate/Ministry%20Tools/MinTaxGuide/2011/2112_Mini
stersTaxGuide5.ashx
Additional Helps and Information
David Rutledge EA, CEP, RFC
Rutledge Financial Group
david@yourchurchmatters.com
YEAR END CHECKUP FOR
CHURCHES. 15 + PAGES, PLUS
A CHECK OFF PAGE
WHAT QUESTIONS CAN I
ANSWER FOR YOU?
Rod Wiltrout
Church Finance Specialist
(559) 256-0858 direct line
(559) 287-7840 cell phone
rwiltrout@csbc.com
www.csbc.com/financialmatters
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