Tip of the Month

IRS Announces Mileage Rates for 2012
The Internal Revenue Service has issued the 2012 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

55.5 cents per mile for business miles driven
23 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations

The rate for business miles driven is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.

As we approach the end of another year, there are some important tasks that should be included on your “to do” list. Don’t forget to:
- Complete all your year-end transactions to be sure they are reportable on your income tax return. This includes non-cash compensation to employees that need to be taxed.
- Designate the portion of each minister’s compensation as a housing allowance by Dec 31.
- Remind your donors to deliver checks on or by the 31^st of December in order to claim a charitable contribution for 2011.
If you have a minister or lay worker who is treated as self-employed for federal income tax reporting purposes, but who you would like to reclassify as an employee, the ideal time to make the change is on January 1, 2012.
The Internal Revenue Service has increased the optional standard mileage rate that employers can use to reimburse employees who drive personal vehicles for business purposes.

The IRS increased the rate to 55.5 cents per mile for travel occurring between July 1 and December 31.

The rate was 51 cents for January 1 to June 30.

Many churches handle mileage reimbursements under an accountable arrangement, in which pastors and staff keep travel logs and submit them for reimbursements at least every 60 days. Under this arrangement, the church is not required to report the reimbursements as income on employees' Forms W-2 .

Travel logs should include date, destination, business purpose of trip, odometer reading at the start of trip, odometer reading at the end of the trip, and total miles driven on the trip.

If you are reimbursed for mileage but not required to submit documentation, it is a non-accountable plan and must be included on the W-2 as taxable income.Texas is an At-Will state, which means employers are free to fire employees for any nondiscriminatory reason unless an employment agreement or contract specifically says otherwise. But did you know that by promising an employee a better schedule or telling him/her that they will be retained for a specific period of time could actually create a contract and jeopardize your At-Will status? Be careful in the wording of your Personnel Policy and in verbal communication to protect your organization from this risk.
Each year as Spring approaches we think of the saying, “April Showers Bring May Flowers”. If you work in the business office you also know that April brings with it several important dates from the Internal Revenue Service. Don’t forget to mark your calendars for the following:

Due April 15
– Federal Income Tax and Self-Employment tax returns by individuals for calendar year 2010
– Last day to file an amended federal income tax return
– Churches must make quarterly estimated tax payments if it expects unrelated business income tax liability for the year to be $500 or more. Use IRS Form 990-W to figure estimated taxes.
– Ministers who have not elected voluntary withholding and self-employed workers must file quarterly estimated federal tax payments for 2011.

Due April 29
– Churches hiring their first non-minister employee between January 1 and March 31, 2011, may exempt themselves from the employer’s share of FICA taxes by filing Form 8274 by this date.

Due April 30
– Churches with non-minister employees (or one or more ministers who report their federal income taxes as employees and who have elected voluntary withholding) must file an employer’s quarterly federal tax return (Form 941) for the first calendar quarter of 2011 by this date.

This is the month to make sure you are withholding the correct amount of taxes from your employees. New for 2011 only is the amount withheld from both ministerial and non-ministerial employees.

Non-ministerial employees: The OASDI portion of social security tax is reduced from 6.2% to 4.2% on wages earned up to $106,800 for 2011 only. The Medicare rate remains 1.45% for 2011. The change does not apply to the employer (church) FICA tax rate of 6.2%.

Ministerial Social Security Taxes: For 2011 only, the self-employed social security tax is reduced from 12.4% to 10.4%. This parallels the two-percentage-point reduction in the social security portion of the employee’s FICA tax, from 6.2% to 4.2%. There is a ceiling rate on the amount subject to Social Security tax of $106,800 for 2011, but no limit on the Medicare tax.

If you are using a Church Management Software system to calculate your payroll taxes, make sure the tax tables are set up correctly. A call to your software company will provide the answer. Ask them to coach you on how to verify the tax tables yourself. Once you run payroll you might want to do a quick manual calculation to ensure the proper amounts have been withheld. Remember—it is not the responsibility of the software company to make sure you are withholding taxes properly. The burden falls on the organization that is withholding the payroll taxes.

On the lighter side: Did you hear what the one cow said to another as they sat under the shade of a tree? “I hear the budget will not be balanced until we come home.”

Have a Happy 2011!
Important end-of-year action items for churches and church schools.
     - Donations must be received or postmarked no later than December 31, 2010 to be eligible for 2010 contribution credit.
     - Cash & cash equivalent (ie. gift cards) Christmas gifts are not considered de minimis fringe benefits regardless of the amount & must be included as taxable income on employees’ W-2 forms.
     - Be sure to include in your employee’s taxable income the cost of group-term life insurance for coverage in excess of $50,000. This additional income is subject to Social Security and Medicare so it is best not to wait until the last paycheck. For instructions on calculating, refer to IRS Publication 15-B.
     - It's a good time to make sure you update your W-4’s & approve those Housing Allowances for 2011.
     - Forms W-2 and 1099 must be provided to recipients by January 31, 2011.

Don’t forget to train your volunteers and employees on how to reduce the risk of Child Sexual Abuse and Harassment. Remember that a good plan includes more than a background check. To maximize the reduction of Child Sexual Abuse your plan should include four components:

1. Applications and Hiring Process 2. Supervision of volunteers and employees
3. Employee and Volunteer Training 4. Responding to an Allegation

Make sure your plan includes training on how to respond to an accusation.
Don’t just rely on background checks.

What if one of your employees is disabled by a job-related illness or injury? The law says that injured workers are entitled to wage replacement benefits as long as they are totally or partially disabled. Can your church or organization afford to pay for medical/vocational rehabilitation and the return to productive employment? As an employer, you must provide medical care to workers for restoration to their former physical condition. Consult with your Insurance Agent today to insure coverage of Worker’s Compensation Insurance.
Did you know that the IRS has a whole section on their website dedicated to Churches and Religious Organizations? One publication you might really enjoy is the Tax and Legal Guide for Churches and Religious Organizations. This publication covers many topics of interest including but not limited to tax exempt status, unrelated business income, compensation to minister’s, and filing requirements. Click here to take a peek at much more.
To Lower Your Risk We Recommend: Review your current policy to assure employment practice coverage is part of your coverage. If it is not included, contact your insurance agent to request a quote for employment practice coverage and defense reimbursement coverage. If you are unsure about your insurance coverage or don’t understand how to decipher your coverage, ask your agent to assist you.
Consider protecting your organization by implementing a sexual harassment policy that provides for zero tolerance of sexual harassment, and educate your staff as to what constitutes sexual harassment. Clearly communicate the sexual harassment policy and the complaint procedure to all employees.
Under the Fair Labor Standards Act (FLSA), the federal minimum wage for covered non-exempt employees increases from $6.55 per hour to $7.25 per hour effective July 24, 2009. Many states also have minimum wage laws.

If the employee is subject to both the state and federal minimum wage laws, the employee is entitled to the higher minimum wage rate.