Clergy Tax-Free Housing Allowance Ruled Unconstitutional

Clergy Tax-Free Housing Allowance Ruled Unconstitutional

Courtesy of: http://www.huffingtonpost.com/2013/11/25/clergy-tax-free-housing-unconstitutional_n_4339673.html

A federal judge has ruled that an Internal Revenue Service exemption that allows clergy to shield a portion of their salary from federal income taxes is unconstitutional.

The clergy housing exemption applies to an estimated 44,000 ministers, priests, rabbis, imams and others. If the ruling stands, some clergy members could experience an estimated 5 to 10 percent cut in take-home pay.

The suit was filed by the Wisconsin-based Freedom from Religion Foundation on grounds that the housing allowance violates the separation of church and state and the constitutional guarantee of equal protection. The group’s founders have said that if tax-exempt religious groups are allowed a housing subsidy, other tax-exempt groups, such as FFRF, should get one, too.

U.S. District Court Judge Barbara Crabb on Friday (Nov. 22) ruled in their favor, saying the exemption “provides a benefit to religious persons and no one else, even though doing so is not necessary to alleviate a special burden on religious exercise.”

The housing allowances of pastors in Wisconsin remain unaffected after Crabb stayed the ruling until all appeals are exhausted. Crabb also ruled in 2010 that the National Day of Prayer was unconstitutional; that ruling was overturned the following year.

Churches routinely designate a portion of a pastor’s salary as a housing allowance. So, for example, a minister that earns an average of $50,000 may receive another third of income, or $16,000, as a tax-free housing allowance, essentially earning $66,000. Having to pay taxes on the additional $16,000 ($4,000 in this case), would mean an 6 percent cut in salary.

The exemption is worth about $700 million per year, according to the Joint Committee on Taxation’s Estimate of Federal Tax Expenditure.

Crabb ruled that the law provides that the gross income of a “minister of the gospel” does not include “the rental allowance paid to him as part of his compensation, to the extent used by him to rent or provide a home and to the extent such allowance does not exceed the fair rental value of the home, including furnishings and appurtenances such as a garage, plus the cost of utilities.”

Tobin Grant, a political science professor at Southern Illinois University, said the exemption dates from an era when churches paid clergy who lived in church-owned parsonages.

“Over time, fewer churches owned parsonages and instead gave clergy housing allowances, which were also treated as tax-free. The difference, however, was that these were regular salaries that now had an exclusion. Part could be tax-free, part couldn’t. So, why not give a pastor a huge housing allowance, which is tax free?”

The ruling addresses the housing allowance, while parsonages are still tax-exempt properties, like the churches that own them.

The law’s tax exemption has been contested since a decade-old dispute between the IRS and California megachurch pastor Rick Warren. In 2002, the IRS attempted to charge Warren back taxes after he claimed a housing allowance of more than $70,000.

He eventually won the federal court case, and that led Congress to clarify the rules for housing allowances. The allowance is limited to one house, and is restricted to either the fair market rental value of the house or the money actually spent on housing.

Church housing has been a hot topic in recent months as the Southern Baptist pastor of one of the nation’s fastest-growing churches is building a 16,000-square-foot gated estate near Charlotte, N.C. The tax value on the 19-acre property owned by Steven Furtick of Elevation Church is estimated to be $1.6 million.

Separately, in a federal court case in Kentucky, atheists are challenging IRS regulations that exempt religious groups from the same financial disclosure requirements of other nonprofit groups.

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Posted in Politics Tax by rkl. 1 Comment

IRS Updated Mileage Rates Released for 2014

IRS Updated Mileage Rates Released for 2014

Beginning on January 1, 2014, the standard mileage rates for the use of a car, van, pickup or panel truck will be:

A. 56 cents per mile for business miles.

B. 23.5 cents per mile driven for medical or moving purposes

C. 14 cents per mile driven in service of charitable organizations.

RKL Financial's Standard rate is $90.00 for a 1040 with a New York State return, with both of the returns being e-filed (the rate does not change no matter how many W-2's, 1099's or other tax schedules (except Schedule C's and E's) that we have to fill out!). If you have a small business (Schedule C) or a rental property (Schedule E) the return is just $50.00 more for a total of $140.00.

 Prompt, Professional and Courteous Service!

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E-mail or Call 716-200-9359

 

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Disappearing Tax Deductions

Disappearing Tax Deductions

While many of the usual temporary tax deductions and credits were made permanent in 2012, there's still a large number that weren't, and that are currently slated to expire or change significantly at the end of the year.

1. Educator's Expenses – IRC Sec. 62(a)(D)

What it is now: Grades K-12 teachers, instructors, counselors, principals and aides can deduct up to $250 of out-of-pocket costs above the line. 

What happens in 2014: Expires on Dec. 31, 2013

2. Cancellation of Debt — Mortgage Debt – IRC Sec. 108(a)(1)(E)

What it is now: Individuals can exclude up to $2 million ($1 million for married filing separately) of COD income from qualified principal residence indebtedness that is canceled because of their financial condition or decline in value of the residence. 

What happens in 2014: Expires on Dec. 31, 2013

3.Mortgage Insurance Premiums Deduction – IRC Sec. 163(h)(3)

What it is now: Taxpayers with AGI no greater than $109,000 can treat qualified mortgage insurance premiums as home mortgage interest. 

What happens in 2014: Expires on Dec. 31, 2013

4. Personal Energy Property Credit – IRC Sec. 25C

What it is now: A credit (subject to a $500 lifetime cap) is available for qualified energy efficiency improvements and expenditures to a taxpayer's principal residence. 

What happens in 2014: Expires on Dec. 31, 2013

5. State and Local Sales Taxes Deduction  – IRC Sec. 164(b)(5)

What it is now: Individuals can elect to deduct state and local general sales taxes instead of state and local income taxes. 

What happens in 2014: Expires on Dec. 31, 2013

6. Tuition and Fees Deduction – IRC Sec. 222

What it is now: Individuals can claim an above-the-line deduction for tuition and fees for qualified higher education expenses. 

What happens in 2014: Expires on Dec. 31, 2013

RKL Financial's Standard rate is $90.00 for a 1040 with a New York State return, with both of the returns being e-filed (the rate does not change no matter how many W-2's, 1099's or other tax schedules (except Schedule C's and E's) that we have to fill out!). If you have a small business (Schedule C) or a rental property (Schedule E) the return is just $50.00 more for a total of $140.00. Prompt, Professional and Courteous Service! Give us a Call Today! E-mail or Call 716-200-9359

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Top 10 Mistakes Investors Make with Taxes

Top 10 Mistakes Investors Make with Taxes

1. Short-term vs. long-term gains

Realized gains on appreciated securities held for one year or more qualify for favorable tax treatment. Long-term capital gain tax rates are significantly lower than short-term rates. Holding a security an extra day, week or month can significantly reduce the tax burden.

2. Foreign stock investments held in a tax-qualified account

Most foreign companies are required to withhold foreign taxes on dividends paid. U.S. investors can claim a tax credit on their tax returns, effectively recouping this lost dividend — but only if the foreign stocks are held in a taxable account.

3. Gold and silver held in a taxable account

Gold and silver are treated as collectibles and therefore are not eligible for capital gains treatment. The federal tax for long-term gains on collectibles is 28 percent.

4. Sale of appreciated securities by elderly investors

The cost basis of appreciated securities is "stepped up" to the current market value upon the death of the owner. Prospective capital gains and related taxes disappear. Conversely, all prospective capital losses will be lost. Elderly investors should consider being quick to sell stocks with losses and slow to sell stocks with gains.

5. Generating excess unrelated business income in a tax-qualified account

Certain investments, such as Master Limited Partnerships, generate unrelated business income. These investments belong in a taxable account. If they are held in an IRA or other qualified plan, and if the Unrelated Business Taxable Income, or UBTI, is greater than $1,000, then the investor must complete and file a rather complex Form 990 and pay additional income tax.

6. Ignoring local tax laws

In some states, investors cannot carry capital losses forward to future years. On a federal return, a capital loss in one year can be used to offset gains in a subsequent year. But capital losses without offsetting gains in a current year are lost for state tax purposes.

7. Failing to consider a Roth IRA conversion

When a traditional IRA is converted to a Roth IRA, tax is due on the converted amount in the year of conversion. If, for whatever reason, an investor will have low income in a year, this is an ideal time to convert and settle the tax bill on this money at a significantly lower rate than is otherwise expected in the future.

8. Failing to realize capital gains

Once again, low income in a given year can provide an opportunity to save taxes. Long-term capital gain tax rates are progressive; rates increase as taxable income increases. For taxable incomes up to $72,500, joint taxpayers pay no tax on long-term capital gains.

9. Improperly calculating the cost basis for MLPs

Given their unique tax structure, a large portion of a typical distribution from a Master Limited Partnership (a form of publicly traded limited partnership that's most commonly related to natural resources, like oil and gas extraction) is tax-free. This tax-free distribution is considered a return of principal and should therefore serve to reduce the cost basis. In this case, ignorance may be bliss because the reduction in basis would result in a higher capital gain at sale (unless the IRS comes knocking…).

10. Allowing a pension plan to become non-compliant

While not as common as the others, this mistake can be very costly. There are a number of actions or inactions that can put a plan's qualified status in jeopardy. Oftentimes, an investor will establish a plan with a brokerage firm, and then assume that the brokerage firm is taking care of the ongoing regulatory requirements, including the filing of IRS Form 5500. Brokerage firms rarely do this, even though they may have provided the original plan document template. Failure to meet ongoing regulatory requirements can result in disqualification of the plan and a very large tax bill. Investors should consider hiring a third-party administrator to take care of their ongoing compliance obligations.

RKL Financial's Standard rate is $90.00 for a 1040 with a New York State return, with both of the returns being e-filed (the rate does not change no matter how many W-2's, 1099's or other tax schedules (except Schedule C's and E's) that we have to fill out!). If you have a small business (Schedule C) or a rental property (Schedule E) the return is just $50.00 more for a total of $140.00.

 Prompt, Professional and Courteous Service!

Give us a Call Today!

E-mail or Call 716-200-9359

 

 

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Posted in Accounting Tax by rkl. No Comments

IRS May Delay the Start of the Tax-Filing Aeason by One to Two weeks

 

The IRS delayed the start of the tax-filing season for one to two weeks, citing the recent 16-day federal government shutdown. The IRS, which had been scheduled to open filing Jan. 21, 2014, will now begin accepting returns for tax year 2013 as early as Jan. 28. The agency will make a final decision on the date in December, according to a statement today. "Readying our systems to handle the tax season is an intricate, detailed process, and we must take the time to get it right," Danny Werfel, the acting IRS commissioner, said in the statement. This is the second year in a row that the IRS has postponed the filing season. Returns for 2012 were accepted starting on Jan. 30 after Congress delayed setting some tax policies.

How does this affect your tax filing for 2013? This means that like last year, I will not be able to file your return until at least January 28th, 2014. We can still prepare your return before January 28th, but we can not file it until at least January 28th. I will keep you updated on any changes with the filing date and any new tax law changes that you need to be aware of. 

RKL Financial's Standard rate is $90.00 for a 1040 with a New York State return, with both of the returns being e-filed (the rate does not change no matter how many W-2's, 1099's or other tax schedules (except Schedule C's and E's) that we have to fill out!). If you have a small business (Schedule C) or a rental property (Schedule E) the return is just $50.00 more for a total of $140.00.

 Prompt, Professional and Courteous Service!

Give us a Call Today!

E-mail or Call 716-200-9359

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Posted in Accounting Tax by rkl. No Comments

Tax practitioners will be charging more this year for tax preparation, according to an annual survey by the National Society of Accountants

Taxpayers can expect to pay an average of $261 for an itemized Form 1040 with Schedule A and a state tax return, the survey found, compared to the $246 reported in last year’s survey.

The fee for non-itemized return will also rise, to $152 for a Form 1040 and state return, against $143 last year.

“The IRS says it takes an average of four hours just to complete and submit a Form 1040,” says NSA executive vice president John Ams. “Add at least another hour if you also have to complete a state return. You have to ask, ‘How much is your time worth?’”

Fee information was collected in a survey of tax preparers conducted by NSA. The tax and accounting firms surveyed are largely owners, principals and partners of local “Main Street” companies who have an average of more than 26 years of experience.

The survey also reported the average fees for preparing other Internal Revenue Service (IRS) tax forms, including:

  • $218 for a Form 1040 Schedule C (business);
  •  $590 for a Form 1065 (partnership);
  •  $806 for a Form 1120 (corporation);
  • $761 for a Form 1120S (S corporation);
  • $497 for a Form 1041 (fiduciary);
  •  $667 for a Form 990 (tax exempt);
  •  $63 for a Form 940 (Federal unemployment);
  • $142 for Schedule D (gains and losses);
  •  $165 for Schedule E (rental); and,
  •  $196 for Schedule F (farm).

RKL Financial's Standard rate is $90.00 for a 1040 with a New York State return, with both of the returns being e-filed (the rate does not change no matter how many W-2's, 1099's or other tax schedules (except Schedule C's and E's) that we have to fill out!). If you have a small business (Schedule C) or a rental property (Schedule E) the return is just $50.00 more for a total of $140.00.

 Prompt, Professional and Courteous Service!

Give us a Call Today!

E-mail or Call 716-200-9359

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Posted in Accounting Tax by rkl. 2 Comments

We Are Now Taking Appointments for the 2016 Tax Season

We have been preparing tax returns for our financial counseling/coaching clients for many years. We prepare 1040's (individuals), 1120's (corporations), 1120S's (Sub-S corporations), and 1065's (partnerships). Our goal is to provide quality tax prep at the lowest cost possible for our clients. We will begin preparing tax returns starting January 26th, 2016.  Appointments can be scheduled by calling 716-200-9359 or email us at RyanTLoos@Gmail.com. 

We have appointments available Tuesday, Wednesday, and Friday from 6pm-10pm & Saturday from 9am – 5pm.

Give us a call today to schedule your appointment.

 

If you are FPU (Financial Peace University) graduate or current student, be sure to ask Ryan to apply the "FPU discount" to your tax preparation ($90 for your Federal & NYS return or $140 is you have a small business).

 

 

 

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Posted in Accounting fcg-slides Tax by rkl. 1 Comment

Cease the Day!

Cease the Day!

By K Loos

I recently said good-bye to a dear friend and mentor who was suddenly called to move to Oklahoma. We had only a few short weeks to prepare for her departure and time was not on our side. The evening before she left, the Lord blessed us with many good memories and a ton of laughs! I will never forget her petite figure behind the giant moving truck wheel and trying to give her direction in the pouring rain, as she backed the truck up to her apartment door.

What this experience taught me, is that life is short and constantly in motion. Friends you love today may not be with you forever- at least until eternity! If only I hadn’t waited so long to extend my friendship to her, I thought, as we shared good-byes that evening.

My friend and I had good intentions of getting together and making pies! I cannot make a good crust to save my life, (ask Ryan), and she generously extended her friendship and skills to help me to become a better pie baker for my husband and family. Sadly, our time together was cut short before we could get together, but I am believing that if the Lord does not provide us with an opportunity to bake together here on earth, that I will receive those heavenly baking skills in eternity, where God promised there would be no more pain and suffering- believe me, my family has suffered!

God has used this experience to work in me greater confidence and less self-centeredness. As a mom, especially, I feel so insecure about my relational skills and it is so easy to fill my time with everything but relationship building. Fellowship in the body of Christ is so vital for our spiritual growth.  “Two are better than one, because they have a good return for their work: if one falls down, his friend can help him up. But pity the man who falls and has no one to help him up!” (Eccles.4:9-10).

I love the story of Moses and the battle against the Amalekite army. Joshua took men out on the battlefield while Moses, Aaron and Hur stood on top of the hill. When Moses had God’s staff raised in the air, they were winning, but when he lowered his arms, the Amalekites began to overcome them. They knew they had to keep the staff of God raised in order to defeat the army, but in order to do so, they all had a role to play. Joshua and his men fought bravely; Moses kept God’s staff raised, and Aaron and Hur did everything to support Moses in keeping his arms raised- even holding his arms up for him!

We all can relate, at different times in our lives, to the different roles that these men played. There have been times when I felt in the forefront of the battle; other times, when I’ve been on the sidelines in prayer and still other times when God placed me in the role of supporting others. The point is, no matter what our physical, emotional and spiritual condition, we are all striving to press forward in the Lord and we need each other to do so!

I don’t know what may be holding you back from reaching out to others. For me it was my own insecurities and business, but regardless, the enemy wants us to be alone because he knows then that he’s got us cornered!

“Therefore, since we are surrounded by such a cloud of witnesses, let us throw off everything that hinders and the sin that so easily entangles, and let us run with perseverance the race marked out for us. Let us fix our eyes on Jesus, the Author and perfecter of our faith who for the joy set before him endured the cross, scorning its shame, and sat down at the right hand of the throne of God. Consider Him who endured such opposition from sinful men, so that you will not grow weary and lose heart.” (Hebrews 12:1-3)

God made you, you for a purpose! Don’t be afraid to be the man or woman He created you to be! Open yourself up and be a friend to others and God will open doors for friendships you never thought were possible! You never know when you will meet the next gem in His Kingdom, and, dare I say, a phenomenal pie baker!  

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