'Sound and knowledgeable advice . . . written in plain English.'
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The most understandable, easy-to-follow tax guide of its kindexplains complex tax concerns in plain language.
For years, ministers have trusted the Zondervan Minister's Tax and Financial Guide to save them time and money. This easy-to-understand workbook simplifies the tax code and offers dozens of tips to reduce your tax bill. For 2005, the guide includes a line-by-line explanation of the 1040 Form as well as information on recent changes in the tax code. Dan Busby also explains the easy steps you can take now to minimize next year's tax bill.
This 2005 edition includes:
* Sound retirement planning helps
* Compensation planning guidance
* Maximizing business expense reimbursements
* Understanding medical expense reimbursements
This publication is also useful to church treasurers and business administrators and to tax preparers who assist ministers.
'Dan Busby masterfully presents these complex issues in a concise, easy-to-understand format.'
Simeon May, CPA, Executive Director, National Association of Church Business Administration
'A good reference guide to have at your fingertips through the year.'
Nazarene Pensions and Benefits Office
'Enormously helpful, clear, and comprehensive.'
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About the Author
Dan Busby is a certified public accountant with a Masters degree in business from Emporia State University. He has worked as controller of a university medical center, partner-founder of a CPA firm, and chief financial officer for a religious denomination. He currently serves as the president with the Evangelical Council for Financial Accountability, Washington, D.C, and is he coauthor of The Christian's Guide to Worry-Free Money Management.
Read an Excerpt
Zondervan Minister's Tax and Financial GuideFor 2004 Returns
By Dan Busby
ZondervanCopyright © 2004 Dan Busby
All right reserved.
Chapter OneLine by Line
There are two short forms, the 48-line 1040A and the super-short, 12-line 1040EZ. Generally, ministers should use the 75-line Form 1040 instead. It accommodates every minister, and there's no penalty for leaving some of the lines blank. Besides, going down the 1040 line by line may jog your memory about money you received or spent in 2004. (Line numbers noted refer to the 1040 and then to Schedule A.)
Filing status (lines 1 to 5). Line 2: If your spouse died in 2004, you can still file jointly and take advantage of tax rates that would be lower than if you file as a single person or as a head of household.
Line 3: If you're married and live in one of the 42 separate-property states, compute your tax two ways-jointly and separately. Then, file the return resulting in the lower tax.
Line 4: If you're single, you may qualify as head of household if you provided a home for someone else-like your parent. Filing as head of household rather than as a single person can save you a bundle on taxes.
Line 5: If your spouse died in 2002 or 2003 and you have a dependent child, you can also benefit from joint-return rates as a qualifying widow(er).
Exemptions (lines 6a to 6d). Remember to include a social security number for any dependent who was at least one year old on December 31, 2004. If your child does not have one, obtain Form SS-5, Application for a Social Security Number at ssa.gov/online/ssa-7004.html. If you are unable to secure the social security number before the filing deadline, file for an extension of time to file.
Income (lines 7 to 22). Line 7: If your employer considered you an employee for income tax purposes, you should receive Form W-2 from the employer. The total amount of your taxable wages is shown in Box 1 of Form W-2; attach Copy B of your W-2 to your Form 1040. Include the data from other W-2s you or your spouse received on this line. If the employer erroneously included your housing allowance in Box 1, Form W-2, deduct the designated housing allowance, show the net amount on line 7, and attach an explanatory schedule.
Form 1040, Line 7. All compensation from Forms W-2 is reported on line 7. Be sure your church has not included a formally and prospectively designated housing allowance in Box 1 of Form W-2. If so, deduct the housing allowance included in Box 1 and attach a schedule to explain the adjustment.
Line 8a: Include as taxable-interest income the total amount of what you earned on savings accounts, certificates of deposit, credit union accounts, corporate bonds and corporate bond mutual funds, U.S. treasuries and U.S. government mutual funds, and interest paid to you for a belated federal or state tax refund (whether or not you have received a Form 1099-INT). If you haven't yet received any of the statements due you, call the issuer to get them. If you received more than $1,500 of taxable interest income in 2004, you must also complete Schedule B.
Most ministers do not have to file a separate schedule if interest or dividend income is $1,500 or less, only the totals need to be reported on Form 1040.
Line 8b: Here's where you note any tax-exempt interest from municipal bonds or municipal bond funds. Don't worry-that income is not taxable. But social security recipients must count all their tax-exempt interest when computing how much of their social security benefits will be taxable.
Line 9: Enter as dividend income only ordinary dividends, not capital-gains dividends paid by mutual funds, which are reported on Schedule D. Your Form 1099-DIV statements show the amount and type of ordinary dividends you received during 2004. If you received more than $1,500 in dividend income in 2004, you must also complete Schedule B. Remember: Earnings from a money-market mutual fund are considered dividend income, not interest income.
Line 10: If you received a refund of a state or local tax in 2004 that you deducted on Schedule A in a prior year, include the refund here.
Line 12: Even when you file as an employee for income tax purposes, you will probably have some honoraria or fee income from speaking engagements, weddings, funerals, and so on. This income, less related expenses (see page 18), should be reported on Schedule C or C-EZ and entered on this line.
Form 1040, Line 12. The only ministerial income that should be reported on line 12 is: fees from weddings, funerals, speaking engagements, and similar income. Unreimbursed expenses related to this income should be deducted on Schedule C or Schedule C-EZ.
Line 13: Enter capital-gains dividends here if you had no other capital gains or losses in 2004.
Line 15a: Report as IRA distributions even amounts you rolled over tax-free in 2004 from one IRA into another. On line 15b, you will report as taxable the amount of any IRA distributions that you did not roll over minus any return of nondeductible contributions.
Line 16a: It's likely that only a portion of the total pensions and annuities you received is taxable. Your Form 1099R will show the taxable amount, which you enter on line 16b. If you received pensions and annuities from a denominationally sponsored plan, you may be eligible to exclude a portion or all of these payments as a housing allowance.
Line 20a: No more than 85% of your social security benefits can be taxed for 2004 and none at all if your provisional income is below $32,000 on a joint return, $25,000 for singles. If your income doesn't exceed the threshold, leave this line blank. If it does, use the worksheet on Form 1099-SSA to compute taxes on your benefits.
Line 21: If your cash housing allowance designated and paid by the employer exceeds the lowest of (1) reasonable compensation, (2) the amount used to provide a home from current ministerial income, (3) the amount properly designated by the employer, or (4) the fair rental value of the home including utilities and furnishings, enter the difference on line 21.
Form 1040, Line 21. If the housing allowance designated by the employer exceeds the housing allowance exclusion to which you are entitled, you must include the difference on line 21 with a description "Excess housing allowance." Your exclusion should be limited by the lower of the fair rental value of a minister-provided home or your actual housing expenses.
Adjustments to income (lines 23 to 36). Line 23: Educator expenses. A teacher, instructor, counselor, principal, or aide may deduct up to $250 of unreimbursed purchased of books and classroom supplies on this line.
Line 26: Interest paid on a qualifying student loan may be deducted on this line.
Line 27: On this line, you may claim a deduction of up to $3,000 for tuition and fees paid to an institution of higher learning for the taxpayer, the taxpayer's spouse, or the taxpayer's dependent.
Line 28: Health savings account deduction. Contributions made by a taxpayer to a health savings account (HSA) up to $2,600 for an individual plan and $5,150 for a family plan are deductible on this line. Individuals who have reached age 55 by the end of the tax year are allowed to increase their annual contribution for years after 2004. Also see Form 8889 on page 22.
Line 29: If your employer paid directly or reimbursed you for your qualified moving costs incurred in 2004, these amounts would not be included as compensation on your Form W-2. Therefore, you would have no moving expenses to deduct on line 29. However, if part or all of your moving costs were not paid directly or reimbursed, deduct these expenses here.
Excerpted from Zondervan Minister's Tax and Financial Guide by Dan Busby Copyright © 2004 by Dan Busby. Excerpted by permission.
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