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MMBB - 2021 Clergy Tax Return Preparation Guide for 2020 ...

2021 Clergy Tax Return Preparation Guide for 2020. Returns RICHARD R. HAMMAR, , , CPA. SENIOR EDITOR, CHURCH LAW & TAX*. ACKNOWLEDGEMENTS. Both the author and Christianity Today's Church Law & Tax Team would like to thank CPA Elaine Sommerville for her assistance with reviewing the material in the Guide . Copyright 2021 Christianity Today International. Clergy Tax Return Preparation Guide by Richard R. Hammar. Used with permission. Published by MMBB Financial Services 475 Riverside Drive, Suite 1700, New York, NY 10115. Tel: Fax: This publication is intended to provide a timely, accurate, and authoritative discussion of tax reporting compliance, and the impact of recent changes in the tax laws. It is not intended as a substitute for legal, accounting, or other professional advice.

Tax highlights for 2020 1. The Tax Cuts and Jobs Act of 2017 On December 22, 2017, President Donald Trump signed into law the $1.5 trillion Tax Cuts and Jobs Act of 2017. In brief, the Act amends the Internal Revenue Code to reduce tax rates and modify credits and deductions for individuals and businesses. With respect to individuals, the bill ...

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Transcription of MMBB - 2021 Clergy Tax Return Preparation Guide for 2020 ...

1 2021 Clergy Tax Return Preparation Guide for 2020. Returns RICHARD R. HAMMAR, , , CPA. SENIOR EDITOR, CHURCH LAW & TAX*. ACKNOWLEDGEMENTS. Both the author and Christianity Today's Church Law & Tax Team would like to thank CPA Elaine Sommerville for her assistance with reviewing the material in the Guide . Copyright 2021 Christianity Today International. Clergy Tax Return Preparation Guide by Richard R. Hammar. Used with permission. Published by MMBB Financial Services 475 Riverside Drive, Suite 1700, New York, NY 10115. Tel: Fax: This publication is intended to provide a timely, accurate, and authoritative discussion of tax reporting compliance, and the impact of recent changes in the tax laws. It is not intended as a substitute for legal, accounting, or other professional advice.

2 If legal, tax, or other expert assistance is required, the services of a competent professional should be sought. Although we believe this book provides accurate information, there may be changes resulting from IRS or judicial interpretations of the Tax Code, new tax regulations, or technical corrections that occurred after the printing of this edition that are not reflected in the text. *THIS Guide IS INTENDED FOR USE WITH MMBB BASED PLANS ONLY. TABLE OF CONTENTS. PART 1. 1. How to use this Tax highlights for Preliminary PART 2. SPECIAL RULES FOR 3. Who is a minister for federal tax purposes?..3. Are ministers employees or self-employed for federal tax purposes?..4. Exemption from Self-Employment (Social Security) How do ministers pay their taxes?

3 5. PART 3. STEP-BY-STEP TAX Return 7. Tax forms and Form Filing Name and Line 1. Wages, salaries, tips, Housing 9. Housing expenses to include in computing your housing allowance exclusion.. 10. Housing Allowance Expense Worksheet for Ordained Ministers Who Own Their .. 11. How much should a church designate as a housing allowance? .. 12. Section 403(b) 13. Contribution 13. Minister's housing allowance and contribution limits.. 13. Taxation of distributions from a 403(b) plan .. 14. Salary reduction contributions (Section 402(g)).. 15. Qualified 15. Sale or exchange of your principal residence.. 16. Line 2 (Form 1040). Interest 16. Line 3 (Form 1040). Dividend .. 16. Line 4 (Form 1040). IRA 16. Line 5 (Form 1040). Pensions and 16.

4 Line 6 (Form 1040). Social Security benefits.. 16. Line 7 (Form 1040). Capital gain (or loss) .. 17. Line 8 (Form 1040). Other 17. Line 9 (Form 1040). Total 17. Income: Adjustments to Line 10b (Form 1040). Charitable .. 17. Line 11 (Form 1040). Adjusted gross income .. 19. Tax Line 12 (Form 1040). Itemized deductions or standard 20. Line 13 (Form 1040). Qualified busines income 20. Line 16 (Form 1040). Compute 20. Line 19 & 28 (Form 1040). Child tax credit and additional child tax credit.. 20. Line 20 (Form 1040). Credit for child and dependent care 21. Line 20 (Form 1040). Retirement savings contributions credit.. 21. Other 21. Line 25 (Form 1040). Federal income tax withheld .. 21. Line 26 (Form 1040). Estimate tax 22.

5 Line 27 (Form 1040). Earned income tax 22. Refund or amount you Sign Other forms and Schedule Step 1: Medical and dental expenses (lines 1 4).. 23. Step 2: Taxes you paid (lines 5 7).. 24. Step 3: Interest you paid (lines 8-10).. 24. Step 4: Gifts to charity (lines 11-14).. 25. Step 5: Casualty and theft losses (line 15).. 27. Note: Job expenses and most other miscellaneous .. 27. Schedule Step 1: Interest income (lines 1 4).. 27. Step 2: Dividend income (lines 5 6).. 27. Step 3: Foreign accounts and foreign trusts (lines 7-8).. 28. Schedule Step 1: .. 28. Step 2: Income (lines 1 7).. 28. Step 3: Expenses (lines 8 27).. 28. Schedule Step 1: Part I (line 2).. 29. Step 2: Part I (line 4).. 29. Step 3: Part I (line 5).. 29.

6 Form 8959: Additional Medicare Form PART 4. COMPREHENSIVE EXAMPLE AND 31. Example One: Active Example Two: Retired Clergy Tax Return Preparation Guide for 2020 Returns substantially increases the standard deduction, PART 1.. thereby significantly reducing the number of taxpayers who will itemize deductions;. INTRODUCTION repeals the deduction for personal exemptions;. All references in this publication to line numbers on IRS eliminates the deduction for moving expenses forms are for the draft versions of the 2020 forms since the as well as the employer tax free reimbursement;. final forms had not been released by the IRS as of the date allows taxpayers to deduct an amount for cash of publication. charitable contributions up to 60% of AGI.

7 How to use this Guide doubles the Child Tax Credit and establishes a This book contains the basic information you need to new family tax credit;. complete your 2020 federal income tax Return . It gives repeals most miscellaneous itemized deductions;. special attention to several forms and schedules and the sections of each form most relevant to ministers. The limits the mortgage interest deduction for debt companion resource Federal Reporting Requirements for incurred after November 2, 2017, to mortgages Churches helps churches comply with their federal tax of up to $750,000 (previously $1 million);. reporting requirements. caps the deduction for state and local income This Guide is divided into the following or sales taxes not paid or accrued in a trade or sections: business at $10,000.

8 Part 1: Introduction This section reviews tax consolidates and repeals several education- highlights for 2020 and presents several preliminary related deductions and credits;. questions you should consider before preparing your broadened the use of Section 529 plans for tax Return . expenses below the college level of education;. Part 2: Special Rules for Ministers In this modifies the Alternative Minimum Tax (AMT). section, you learn whether or not you are a minister to make it apply to fewer taxpayers; and for tax purposes, whether you are an employee or self- modifies the estate and generation-skipping employed for both income tax and Social Security transfer taxes to exempt most taxpayers. purposes, and how you pay your taxes.

9 Part 3: Tax Return Preparation This section 2. Other tax changes of interest to ministers explains how to complete the most common tax forms and other church staff and schedules for ministers. There were several tax developments in prior years that Part 4: Comprehensive Examples and Sample affect tax reporting by both ministers and churches for Forms This section shows a sample tax Return 2020 and future years. Here is a rundown of some of the prepared for an ordained minister and spouse and for a key provisions: retired minister and spouse. You may be able to claim the earned income Federal Reporting Requirements for Churches credit for 2020 if (1) you do not have a qualifying This resource provides assistance to churches (especially child and you earned less than $15,820 ($21,710.))

10 Treasurers and bookkeepers) in filing federal tax forms. if married); (2) a qualifying child lived with you and you earned less than $41,756 (47,646. Tax highlights for 2020 if married filing jointly); (3) two qualifying children lived with you and you earned less than 1. The Tax cuts and jobs Act of 2017. $47,440 ($53,330 if married filing jointly); or On December 22, 2017, President Donald Trump signed (4) three or more qualifying children lived with into law the $ trillion Tax cuts and jobs Act of 2017. you and you earned less than $50,954 ($56,844. In brief, the Act amends the Internal Revenue Code to if married filing jointly). The maximum earned reduce tax rates and modify credits and deductions for income credit for 2020 is (1) $538 with no individuals and businesses.


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