In previous years, you could file an IRS Form 4868 and get an automatic extension of four months, delaying your filing until August 15^th. If you needed additional time, you had to file another form, providing a specific reason, to obtain an additional two month extension. The two step process has been eliminated. If you file a Form 4868 requesting an extension now, you will be granted an extension for six months, pushing the deadline for filing back to October 15^th.

Taxpayers should remember that while the deadline for the actual filing of the return can automatically be extended now until October 15^th, the taxes are due by no later than April 15^th. If the taxes are not paid by April 15^th, then the taxpayer will be subject to both penalties and interest on the amount owed.

In addition, the IRS suggests that you write your Social Security number, your daytime telephone number, the tax year and the type of form you filed (1040, 1040A, or 1040EZ) on your check also.

It should be noted that there are certain “triggers” that can spark the IRS to take a second look, or at least request additional information, about your tax return. These “triggers” can range from simple mathematical mistakes on your return to certain deductions that you claim. According to the IRS, the most common “triggers” are:

• sudden spikes (drops or increases) in income
• missing forms or undocumented income
• an unsigned return
• missing Social Security numbers for the taxpayer or dependents
• filing a Schedule C – self-employed taxpayers are three times more likely than wage earners to be audited
• deductions that exceed the norm for your income
• taking the home office deduction, and/or
• casualty losses to your home

None of these “triggers” should keep you from filing an accurate tax return. However, if you are claiming such, you should make sure that you have complete and documented information to back up your claim.

While the loan program operates similar to the previous church loan program under the retirement plan, some aspects have changed – and hopefully for the better. Most notably, the Church Loan Fund now offers rates ranging from a low of 6.75% to a high of 8.75%, compared to the old program where all loans were priced at the 8.75% rate. Under the new rate structure, the interest rate is determined based upon an objective, detailed analysis of the credit-worthiness of the church following a thorough review of the church’s financial condition. Simply put, a church which can demonstrate stable to growing income, plus control over their discretionary spending, may qualify for an interest rate as low as 6.75%.

An extensive application process is required before a loan request will be considered by the Church Loan Fund. The major provisions of the church loan program are as follows:

• Five-year (5) balloon note OR a ten-year (10) balloon note with a five-year interest reset provision.
• Twenty-year (20) amortization schedule for payment and interest
• No Prepayment Charges
• No Origination Fees
• $250 Application Fee
• Loan to Value Ratio not to exceed 60% of the current appraised value
• Loans payments not to exceed 15-25% of the church’s monthly income
• Basic documentation requirements include a first mortgage, approval resolution by the local church, state or regional council guaranty agreement, non-compete covenant by pastor, Church of God “warranty deed,” certified appraisal, title insurance, property and casualty insurance, etc.

If you are interested in a loan from the Church Loan Fund, you are invited to visit our web site at http://www.benefitsboard.com/churchloans/ to learn more about the program. After reviewing the policy manual at the above link, you may contact the Church Loan Fund staff by e-mail at aconine@benefitsboard.com or by phone at (877) 478-7190 toll-free.

Since your accounts at the Benefits Board are a part of a tax-sheltered investment vehicle (specifically, a 403(b) account), you cannot deduct losses that you suffered in the stock market. Just as you are not required to claim the gains (or interest earned on your account), you cannot deduct losses when those occur. Other than the tremendous tax advantages of contributing to a tax-sheltered account, your account with the Benefits Board has no tax consequences until you start making withdrawals from the account.

So tax time may not be such a dreaded time of the year in your household after all. Don’t delay – get your return filed and look for the “check in the mail.”

The answer clearly seems to be NO.

In Deason v. Commissioner, 41 T.C. 465 (1964), the Tax Court ruled that section 265 of the Internal Revenue Code denied a deduction for any expense allocable to tax-exempt income. Although the Deason decision involved transportation costs, the principle of the case is thought to apply to the home office expenses of a minister. In other words, the Deason case is interpreted to prohibit a minister who is claiming a housing allowance from being entitled to the home office deduction.

The Internal Revenue Service Audit Guidelines for Ministers clearly denies this deduction, while noting in the alternative that “double dipping” for mortgage interest and taxes is allowable:

The church often provides an office on the premises for the minister, so the necessity of an office in the home should be questioned closely. Furthermore, since the total cost to provide the home is used in computing the exempt housing allowance, home office deductions for taxes, insurance, mortgage interest, etc. would be duplications. (Note that itemized deductions are allowable for mortgage interest and taxes. IRC § 265(a)(6), and Rev. Rul. 87-32, 1987-1 C.B. 131).

Simply put, if you are getting a ministerial housing allowance, you should not be claiming a home office deduction. A minister can claim one or the other. Due to the “recapture” provision relative to the home office deduction and the scrutiny that the home office deduction still comes under from the IRS, it seems to be a rather simple decision – the minister will get much more savings generally out of the housing allowance than from the home office deduction. The housing allowance is basically a tax credit while the home office deduction is just that – a tax deduction. Credits are generally much better than a deduction.

Besides, if the housing allowance should go away in the future, the minister can then claim the home office deduction.

Following that line of thought, the IRS in their response to Senator Isakson contended that an individual’s contribution that is designated for the medical bills of his pastor is not deductible under the Internal Revenue Code (Section 170) as a charitable contribution. The IRS’s response became public in INFO 2009-0038. At this link you can read the IRS’s complete response, only with the constituent’s name redacted.

Most troubling about the response is that the IRS seemed to answer a question that was not asked, i.e. are all offerings designated for a pastor, given through the local church, considered to be non-deductible charitable contributions? The only question in controversy involved the deductibility of a contribution given to a church to help pay a minister’s bill for previous health expenses, not a simple situation where a gift was given to the church just to bless the pastor. However, the IRS’s response seems to be a broad sweep that covers any designated gift through the church to a pastor.

Dan Busby, President of the Evangelical Council on Financial Accountability, in an article on this subject noted that this interpretation may effectively limit all designated contributions to pastors from being deductible charitable contributions. Mr. Busby, a noted Certified Public Accountant and the author of the Zondervan Minister’s Tax Guide, suggests that a church member who wishes to provide funds for a pastor should be encouraged to make the gift directly to the pastor. He notes that efforts to “run gifts for pastors through the church” are the basis for headaches for both the church and the pastor.

We will continue to closely watch to see if the Internal Revenue Service offers additional clarification on this issue in future revenue rulings.

• Choosing the wrong filing status
• Failing to include or using incorrect Social Security numbers
• Failing to use the correct form or schedules
• Failing to sign and date the return
• Claiming ineligible dependents
• Failing to file for the Earned Income Tax Credit
• Improperly claiming the Earned Income Tax Credit
• Failing to pay and report domestic payroll taxes
• Failing to report income because it was not included on a Form W-2, Form 1099, or some other information return
• Treating employees as independent contractors
• Failing to file a return when due a refund
• Failing to check liability for the alternative minimum tax

The IRS calls this list their “dirty dozen.” You can find more about common mistakes made on tax returns by visiting the IRS’s web site at www.irs.gov.

1. Prepare a Will. Even the person who has little to no assets should have a will. Most states even allow a hand-drafted will to be used. A will allows you to specify how you want your assets divided upon your death. It alleviates confusion and also keeps the state from dividing your estate. While probate seems to be a daunting task, a well drafted will and advance planning may eliminate the need for probate.

2. Healthcare Directive or Living Will. Complete a healthcare directive or “living will” to guide your family in case you are ever in a vegetative state and not able to make healthcare decisions on your own. Do you want to be kept alive on life support if you will never regain a functional quality of life? Do you want to be fed through a tube? A healthcare directive allows you to make all these decisions in advance.

3. Power of Attorney Authorization. A trusted child or friend should be given the right to transact business for you if you became ill or incapable of taking care of your own affairs. With a durable power of attorney, you are able to appoint an agent to manage your financial affairs, make health care decisions, or conduct other business for you during your incapacitation. A durable power of attorney may be general or limited. A general durable power of attorney may allow your agent to do every act which may legally be done by you. A limited durable power of attorney cover specific events, like selling property, making investments, or making health care decisions.

4. Update Beneficiaries. Make sure that your retirement accounts, your insurance policies, and certain bank accounts have updated beneficiaries. Those accounts pass to the designated beneficiaries outside of what your will might say and without probate. Therefore, if you write someone out of your will, you must make sure that you delete them from your beneficiary designated accounts.

5. Add a Co-Signer. If you are the only person listed on your checking account or other transactional accounts, a court order may be required for your heirs to access those funds after your death. You may have set aside funeral expense money in your bank account but if someone cannot write a check from that account, it may take months to be able to pay your final expenses. A trusted child or friend should be selected as a co-signer since they will have unlimited access to your bank account.

6. Access to Safe Deposit Box. Just as adding a co-signer to your checking account, at least one other person should have authority to access your safe deposit box, assuming things of value are kept in the safe deposit box. Not only should someone have access to the safe deposit box, more importantly, a trusted child or friend should know that you have a safe deposit box – and a general description of the contents of the box.

7. Access to Your Home. If a close relative does not live nearby, a trusted neighbor should be given a key to your home. If you fall or are unable to come to the door, or if you pass away, it is vital that someone can access your home without having to break in.

8. List Passwords and User Names. With the proliferation of social media (Facebook, Twitter, etc.), on-line banking, and other Internet-based accounts, a person can have literally dozens of “user names” and “passwords.” It is imperative that a list of those passwords and user names, along with the appropriate security questions, be kept in a safe place and updated regularly. Without such information, it could take months (and a court order) to have such sites taken off the Internet at your death.

9. Funeral Plans. Do you know where you would like to be buried? Do you want to be cremated or buried? Who do you want to preach your funeral? While you most likely have answers to all those questions, does anyone else have that information? For funeral matters, specific instructions should be written and then given to a trusted child or friend – and not placed in a safe deposit box or made a part of your will.

10. Letter of Instruction. While a will is vital to pass on major items at your death, there may be smaller and more personal items that you do not want to include in your will – but that you want to make sure gets to the right person. To make sure your wishes are fulfilled, write a letter of instruction that is attached to your will, specifying who is to get your favorite diamond ring or some other cherished item. A copy of the letter should be given to a trusted child or friend to make sure that those cherished items are not taken before the will is read.

11. Gift now. If you have specific items that you want to leave to children, grandchildren, or friends, why wait until your die? Why not gift those items now so that you can watch the recipient enjoy the gift while you are still alive. The tax laws allow you to make certain gifts while you are alive without creating any tax liabilities.

12. Take Care of Your Spouse. If you were to die today, is your spouse capable of taking care of his self or would he need to move in with a child or have a care giver? Are resources available for a caregiver for your spouse at your death from an insurance policy or other assets that you may leave? You should have the discussion now as to how your spouse would be cared for at your death. The last thing that should be discussed at your funeral is “who is going to take care of Dad now that Mom is gone?”

Obviously none of these topics are fun and enjoyable – but all are necessary to have with your family. A little preparation now will go a long ways towards making your transition from your earthly home to your heavenly home easier for your family and friends. So don’t delay in making your final preparations.