MAMalody

My business is a conplete internet based paperless business. I do not do appointments. As such, I still only had two people last year who wanted to use plastic. I ran them through my daughters ProPay account that she has for her business. I usually just transmit the final product, receive their F8879, file the return, send them a F9325 and about two to four weeks late, there it is in the mail. Mike

Interesting comparison site. It was interesting to note that eFax had an ad on the page yet were not listed among the ten rated. I wonder if the rating is objective or subjective, that is paid of unsolicited?

Well, I did it. I signed up for TrustFax today. Time will tell whether it was a good decision. I will keep my dedicated fax line for one more month, then the deep six....unless TrustFax doesn't work out.

Not yet...

In direct answer to your question, it does not go on Schedule C. Ultimaltely, going by KCs directions, you will list the wages on line 7 of Form 1040, complete a Form 2106 for any unreimbursed professional expenses, take the IRC 265 limitation and complete the Form SE with appropriate deduction for unreimbursed professional expenses (irrespective of the IRC 265 limitation). While you didn't mention it, you may have to see how his housing situation is, you will see this as you fill out Worksheet #1 mentioned by KC.

I appreciate the posts for possible resources. I need to make a change this year or next. I am currently about 90% paper free. Everything I do is through the Internet. In fact, I do not do office visits at all. I have worked stright off the hard drive in the past. My file looked like this. Client Information .... Last Name, First Name SSN (last four digits) Tax Year Income Tax Return Other Work Papers .pdf of return(s), F4868, F9325 and signed 8879 kept in Income Tax Return Copy of engagement letter, blank (to be sent) organizer and return flow checklist kept in Other All incoming e-mails & faxes were file by date (yymmdd) under Work Papers. (My faxes come into my computer and am in the process of going to an Internet fax service.) The...represents the work flow of the return. Such as Organizer Sent, Ready to Work, Awaiting Infomration, etc. I had a variety of files, kept in workflow order and everything work was completed in an area it was listed in the checklist and put in the appropriate file. Some of the files were kept in name order, such as Returns Completed, Organizers Sent, Awaiting F8879, etc. Some were kept in subfolders in number order such as those for Ready to be Worked, To Be Reviewed After Tax Season (for those new clients that needed prior year amendments, etc.). In that way it was FIFO. I have been hesitating to change to Vista because it is difficult, as I have observed, to operate out of the hard drive and my current system would not prove to work. I need to find a new system that will work with Vista. Fortunately there have been as many bugs with Vista as there are at a cattle feedlot, so I have not had to change over yet. Looks like this may be the year, however. Worked for me.

I really liked the ATX organizer a couple of years ago that was downloadable into the program. Was kind of nice. Since that is gone, I use a Word organizer that can be filled in on the computer and sent back to me. Still takes my input but works better for the client. With my business being totally internet based with no face interviews I am interested in this thread for any additional information or sources. Mike

I'm glad I only have a south 40 and no mud is allowed.

I will check those out. Thanks for the input. If anybody else is out there, feel free to chime in. Mike

Does anybody use an Internet Fax Service? I would be interested in the site, your experience and how it works. Thanks for the help. Mike

Well, I did it. I completed teaching the 3hr CPE for OSTC. I thought it went well. My wife was along and said that some people that thought she was one in attendanc mentioned to her that "he was pretty good and they learned a lot." She said, "boy, you have got that right. He was great!" Thanks for the prayers, guys/gals, you made it happen! Mike

Isn't that great! I just did an amended return last night, and check the letter out of habit and what a pleasant suprise. Mike

Actually the question is: was this a complete or major remodel of the kitchen?

I had the same experience with ATX when my program crashed and the data base was wiped out. It was interesting watching them do their thing. Total call and fix was about 15 minutes. I was impressed and everything worked....like it never happened.

The effect of line 19 on the Form 1040X is to disallow any additional benefit of any prior refunds on the original return. The TP had a benefit that he applied to the subsequent year return. So, if you are saying that you tax liability on line 10 increased $1300 over the original return, I don't see the problem because the TP already used the refund benefit from the orignial return. As I recall the application to a subsequent year refund cannot be changed once made. Have I misunderstood your question?

I tried to head this off and sent a copy of the Stimulus Payment Schedule to each client. As a result I have only had three questions on it. Worked for me. Of course, my entire clientbase is Internet based. I don't do office interviews. If you would like a copy of the schedule send me an e-mail at [email protected]

I'm not sure about this "vow of poverty" you are talking about. Members of religious orders who have taken a vow of poverty are exempt from paying SE tax on earnings for qualified services. In this definition, earnings are considered the income of the religious order. I don't see this as your situation and would agree with your suppostion and Jainen's comments that the regular contribution verification rules would be in play here. You observation about the individual directed giving would also be correct, based upon the facts presented here. I hope this helps. Mike

Thank you. I truly appreciate it.

Not a problem. I don't care if I am right or wrong (well, I really do:>), but we need the correct answer and all to be operating from the same page. Time will tell. Have a good day! Mike

Tom, I think their form is wrong. I called Guidestone and queried them on this issue and they indicated that housing is not included in compensation for plan contribution limitations. I indicated that there was some conflicting advice being given by their site and they are going to review it and get back to me. They said the key term on the form is "on the W-2." I pointed out that their form in the same section indicate housing and rental value of parsonage. That a casual reading of the form did not make a limitation to W-2 items only. The response was they assumed we would know. I point out that the form was drawn up by their attorney and I'll bet he didnt' assume anything. She took my info and said she would get back to me. BTW, this sounds confrontation as I type it but it wasn't. They are good people.,..just need to clear this up. If something different should come up in the next couple of days I will get back to you. Sorry about the confusion. Mike

Sorry it took so long for me to get back to you. This thread did not show up under threads that had a response to them. I must have done something wrong. <<Thank you for the very detailed response, but now I am very confused. The plan document for DVBA from Guidestone has a bunch of check marks and choices to make. Under the category of compensation, it asks what is included in compensation. There is a check box for housing allowance. Are you sure that housing allowances cannot be considered income when calculating the employer contributions to the employee/pastor account? Or am I reading the plan document incorrectly. It says the employer will contribute X% of the employee's compensation to the plan. Compensation includes housing allowance. Is it only that the employee must have "includible compensation" to make a deferral, but the employer may make a contribution based on "total compensation" which can be based on housing allowances?>>> I have no idea why their form is set up that way, unless they are trying to make sure that housing is left out of the compensation. If they just use the term compensation they may not know what the computation is based on. If they know that housing is included in the computation they can correct it. If this is a form you do not return, I suggest that you look again at their directions to see if anything is worded poorly. Failing that, you might try contacting them directly. <<<Are you saying that the pastor when he designates his compensation as housing every year might want to leave some amount as wages, then defer that amount into the 403( b ) plan? Is that a legitimate, legal strategy for the pastor to use?>>> Yes to both. I mean, how is that any different really, than carving an amount out for professional expenses to be used with an accountable reimbursement policy. You are simply receiving the same amount of money from the church structured to give you the best tax and economic advantage. <<<Thank you again. Your expertise in this area is invaluable to us that do not practice regularly in this area.>>> If I am not out of line for this board, you might put me on your prayer list. I am teaching a 3 hour CPE slot on clergy taxes for the OSTC on 17 May. I'm not sure this type of public speaking is my forte. I hope this information has been helpful.

While this may be true, in the real world, is it really a problem. While I can visually see a difference, in the course of a day and ever how many returns that is, are we talking more that 1 minute elapsed time?

You would happen to be in the 8th federal circuit, would you? That is the only place this case is somewhat uniformly used and accepted. That is not the case elsewhere. It is interesting to note about the above case: 1. The Assembly of God national organization's recommendation is to disregared the Alford decision and to acept the employer/employee realations when the facts and circumstances support it. 2. It is unusal for a pastor to provide his own furniture etc. Another court case you may want to read is Weber v. Commissioner, 103 TC 378, 386 or Radde v. Commissioner, TC Memo 1997-490 and PL 9825002. I must admit, however, that these are not determinitative cases either. As a side note it is interesting to me that these case all seem to be in the same time window, geographically diverse with opposing opinions. Oh well, that 's what makes court cases. Interestingly enough, it has never been a choice on whether you are self-employed or a common law employee, it has always been a matter of law. I believe that is why the "20 Common Law Rules" are used. I do admit there can be some ambiguity here in there application and interpretation and there appears to be an employee bias. Don't we use these rules to make these determinations all the time on hobby vs self-employed, well, sort of. We simply apply the facts and circumstances to arrive at the best decision we can. In doing this, I have found that only about 2-3% of the ministers fall truly into the self-employed category. (Probably the 12 or 7 factor test would be better applied here due to the "employee slant" of the 20 factor test.) Other issues: To be eligible for "Tax Free" fringe benefits such as medical insurance, group term life insurance, etc., an individual must be a common law employee. Hypothetically, if a minister could be considered as an independent contractor and use Schedule C for reporting salary and expenses, he would have to report as taxable income the value of any fringe benefits provided by a payor. With a properly constructed compensation package and an accountable reimbursement policy, a minister (common law employee) does not lose any of the perceived benefits of a Schedule C. Until the Small Business Job Protection Act of 1996, a "self-employed" minister was not able to make contributions to a 403( TSA per RR 66-274. While this is prior to the Alford case, it is interesting to note that Congress had to get involved to give the "self employed" minister this ability. I am not aware of any clergy audit, where this has been a question, that has not come down on the side of being a common law employee. Some of these were audited by friends of mine, so I know there was good representation. In fact, I gave them the court cases that would be called into question, including Alford, and they lost, even in appeals. I don't think any of them went to court. While I can't find any information on it today, about few years ago the IRS had a project proposed to audit about 5,000 pastors specifically on this issue. It was never funded by Congress. That is one of the reasons there is a MSSP on clergy. In my judgment, if you are going to advise a pastor to use Schedule C or not disuade him from it, you must review the real risks for him, even if there is only a 2% chance of audit. There is more that could be said or other cases available that muddy the water, but we cannot ignore the clear direction the IRS is going with somewhat general support of the majority of court cases. This is my nickel's worth. Mike

<<<Our church is very small, but we are members of the Southern Baptist Convention and the local Delta Valley Baptist Association. Delta has a 403( plan through Guidestone that our church can participate in. Or we could contact Guidestone ourselves and get a plan, or we can go outside the SBC and get a plan from any commercial source (I assume).>>> I have been impressed by the quality of Guidestone Financial Resources information available for pastors and their tax circumstances. They have a free downloadable Minister's Tax Guide that is not too bad. <<<My understanding of a 403( is that is basically a 401K for non-profits? The "new" thing that I learned was that the pastor housing allowance is or can be compensation for purposes of any match or employer contributions. Since we pay our pastors so little, it is all designated as housing allowance. We have two pastors (no salary, all housing) and three part time employees (all retired from other jobs, secretary, treasurer, janitor) who receive salary only. We do not pay any health or other benefits.>>> The tax code's definition of includible compensation includes any amount received from an employer which is includible in gross income. Section 107 of the tax code specifies that a minister's housing allowance (or the annual rental value of a parsonage) is not included in the minister's gross income for income tax reporting purposes. Therefore, it would appear that the definition of includible compensation for purposes of computing the limit on annual additions to a TSA would not include the portion of a minister's housing allowance that is excludable from gross income, or the annual rental value of a parsonage. The IRS website contains the following question and answer, which affirm this conclusion: Question. I am an employee minister in a local church. Each year, my church permits $25,000 as a yearly tax-free housing allowance. I would like to use my yearly housing allowance as compensation to determine my annual contribution limits (to a TSA) under section 415(C ) of the Internal Revenue Code. May I do so? Answer. No. For purposes of determining the limits on contributions under section 415(C ) of the Internal Revenue Code, amounts paid to an employee minister, as a tax-free housing allowance, may not be treated as compensation pursuant to the definitions of compensation under section 1.415-2(d) of the income tax regulations. You will want to crunch the numbers and see what you can include in gross income (reduce the housing allowance to do this) to give them this benefit. You may be able to do this without producing any taxable income. It may be that the reduction of housing allowance will not hurt them from a tax prespective and allow them to begin to acrue retirement benefits. If I remember correctly, the CA Southern Baptist, contribute on behalf of their pastors if they participate in this program. <<<Are there any problems with putting in a 403( b ) plan? I understand the universal access requirements and the highly compensated rules. I just don't know if there is something else we should be looking at?>>> There is no problem, the questions is do you want to. I hope this helps. Mike

I thought in your first posting that these clients did not have a designated housing allowance. You sentence above makes me think that they simply do not have a W-2 with housing allowance on it. So to cover my bases: 1. Housing allowance is not required to be listed on the W-2. It is simply required to be designated prior to distribution. 2. If you actually, meant that there is no prior designated housing allowance, then you are correct, you do no give them any of the housing allowance benefits, it is all taxable income. Mike