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2006
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August 2006--There are many charitable giving provisions
that affect individuals in the "Pension Protection Act of 2006" that was
enacted by Congress in August. For a printer-friendly version of
an article that outlines the major provisions affecting individual
taxpayers,
click here.
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May 17, 2006--President Bush signed
the "Tax Increase
Prevention and Reconciliation Act of 2005" into law on May 17, 2006. For
a printer-friendly version of an article that outlines the major provisions
affecting individual taxpayers and small business owners,
click here.
2005
This downloaded version
can be printed and used to provide the donor with a contemporaneous
written acknowledgment of the contribution using copy B or copy C.
This form must be furnished to the donor no later than 30 days after the
date of contribution or date of sale, depending on which box is checked on
the form (see instructions to the form).
The official IRS Form (red
copy A) is required to be filed with the IRS by February 28,
2006 for contributions completed in 2005.
You can order the official
IRS form and the instructions by calling 1-800-TAX-FORM.
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January--Congress passed and the President
signed a new law regarding cash contributions made to help with the
Indian Ocean
tsunami relief efforts. The law provides that if a cash contribution is
made in January 2005 for relief of victims in areas affected by the
tsunami, such contribution may be treated as made on
December 31, 2004
. For more details, click
here.
2004
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Effective
January 1, 2005
, if a church or ministry receives a
donated car valued at over $500, then sells it without “significant
intervening use or material improvement”, the amount of the charitable
deduction shall not exceed the gross proceeds received from the sale.
There are reporting requirements to the donor as well as to the
IRS.
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IRS is applying intermediate
sanctions to churches and pastors. In a 2004 ruling, a minister was
assessed penalties and ordered to pay the church back for expenses paid by
the church because there were no documents to substantiate that the
expenses were related to church business. Payment of these expenses
by the church was considered an excess benefit because the reimbursed
business expenses were not documented under an accountable reimbursement
plan.
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Recently the IRS has been rejecting
Form 4361 applications if filed in the same calendar year a minister
becomes licensed. The IRS says
a minister must have earnings from ministry from 2 different calendar
years before filing.
- Business mileage rates for 2005 have
been increased by 3 cents per mile:
business-40.5 cents per mile
charitable-14 cents per
mile
medical/moving
expenses-15 cents per mile
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Employees may be eligible in 2004 for a nontaxable Health Savings
Account which is used to pay medical expenses, subject to rules similar to
an IRA. They are available to
employees
under age 65 covered by
an
employer-sponsored "high
deductible" health plan.
Limited contributions can be
made tax-free by employees and employers into these plans.
Churches
and their employees may realize substantial savings by converting to a
high deductible plan coupled with an HSA.
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Churches are required to withhold up to 30% of any honorariums paid
to nonresident aliens. This
applies to many churches that are inviting foreign evangelists or pastors
speak at their church and are paying an honorarium.
For more information, see IRS publication 515 at
http://www.IRS.gov/pub/irs-pdf/p515.pdf.
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In
June 2004, H.R. 4520 contained provisions that would allow churches to
engage in more political advocacy without endangering their tax
exemptions. The provision would allow religious organizations a
limited number of violations of existing rules against political
endorsements under Internal Revenue Code Section 501(c)(3).
2003 Tax Law Changes
In
response to heavy pressure from the Bush administration, Congress passed
tax cut legislation just before its Memorial Day 2003 recess.
The new
law accelerates previously scheduled individual income tax rate cuts and
grants short-term tax incentives for certain types of business investment.
In general, the main beneficiaries are individual investors, small
businesses planning to invest in new equipment or off-the-shelf computer
software, and middle income families with minor children. Almost all
individuals who pay federal income tax will experience some tax reduction,
and wage-earners should see some of this reflected in lower withholding
taxes during the second half of 2003.
Click
here to download a letter that gives a brief overview of the new law,
officially named the “Jobs and Growth Tax Relief Reconciliation Act of
2003” to reflect its intended purpose of stimulating the economy.
(You
will need Adobe reader to view this file. You can get
a free Adobe Acrobat download to open and read this from http://www.adobe.com/products/acrobat/readstep2.html
May 2002
On May 20th, President Bush signed the Clergy Housing Allowance Clarification Act
of 2002". This bill limits the nontaxable portion of the housing allowance to the fair rental
value of the furnished home including utilities. This has been the
IRS view since 1971. This bill was effective January 1, 2002 and was
not retroactive; however it applies to any tax returns
that are filed after April 16, 2002.
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