We’ve been traveling like crazy and it’s been a BLAST! Beginning of June we were in Jacksonville, Fl for a week at a convention… Then, a week or so later we were up to Chicago to spend some time working with Kristy. My brother graduated with his MBA from Kellogg School of Management, (ie. Northwestern University) so we were able to go to his graduation while we were up there. Yeah, he’s really smart! Then, we jumped over the big lake to Grand Rapids, Mi to meet with some current customers as well as some really cool folks at Vision360 and Impact church. It was AWESOME! We had a blast and got to meet some really great people!

So… Sorry we’ve been quite… We’re traveling like crazy and growing, growing, growing! Things are busy, but we’re having a blast and loving every minute of it.

Be on the lookout for our booth at the 2008 Catalyst Conference!

Here’s one of the beauties of outsourcing… We just finished talks and setup with ADP and are ready to roll out our new payroll products. For the longest time, we’ve been using Intuit payroll services and have been manually processing payroll transactions. Well, with ADP, this whole process is going to be automated. Because we process a certain number of companies (Churches) / employees through payroll, we qualify for all of the same benefits that large companies (ie. 1,000 + employees) get, however at a fraction of the cost. For example, each employee for each church, small business, non-profit, musician, etc. will get a login to our website (securely through ADP) where they can go at any time to get any payroll related information. Lost your paystub? Just login to the website and reprint it. Need a calculator to figure out your allowances? Just login to the website. There are a ton of great new benefits that we will be rolling out over the next several months… And, guess what?

You aren’t going to pay ANY more that what you’re paying now!

Again, even if you’re a church with only 2 people on staff or a company of 1, you get to take advantage of the same benefits that the organizations with 200 people on staff get… And it doesn’t cost you an arm and a leg!
This is exciting news, both for US and for you! So, all that being said, we’re going to begin the transition NOW. We’re not waiting! In fact, some of you will even see this take place on your next paycheck! We have a dedicated team of 3 people in the Alpharetta office of ADP who, as we speak, are converting our customers over to their system.
By the way, in case you don’t know, ADP is one of the largest payroll processing companies in the world. They do almost $8 Billion dollars in revenue each year, are publically traded on the NY SE, and have over 600,000 clients. It’s pretty exciting that we get such personalized attention from such a big company.
So, be on the lookout for more payroll related products to roll out. Again, this is just one more way that we are working to make your life easier by alleviating those administrative responsibilities that keep you from focusing on your mission.

The IRS excludes the costs of renting or maintaining a home from the gross income of a “duly ordained, commissioned, or licensed minister of a church”. For the sake of simplicity we will use the term “commissioned” throughout this discussion. For all you admin people, per Revenue Ruling 62-171, 1962-2 C.B. 39, the IRS has ruled that an employee holding an administrative position may also qualify for a Housing Allowance under Section 107 of the Code.

The Housing Allowance is limited to the lessor of:

• The amount designated as Housing Allowance.
• The amount actually spent on housing expenses.
• The fair rental value (FRV) of one’s home.

The IRS Regulations say the request must be made in advance of receipt of any monies advanced as a Housing Allowance.

Therefore, in order to properly document a Housing Allowance, the following should be observed:

• A request for Housing Allowance should be made by the employee to the Board of Elders.
• The Board of Elders needs to initiate a Housing Allowance as reflected in Board Minutes.
• A specified dollar amount designated as the Housing Allowance should be mentioned in Board Minutes.

The Church should have a file for each commissioned employee which contains:

• A worksheet computing the Housing Allowance.
• A copy of the Ordination Certificate.
• A copy of an approved Form 4361 (if applied for).

Several other tidbits to note…

• Housing Allowances can be increased or decreased mid-year.
• Unused Housing Allowance must be claimed as income when taxes are filed.
• A good time to review Housing Allowances is during the budgeting process for the coming year.
• The amount of the Housing Allowance should be based on a percentage of the employee’s salary that might be reasonably spend on housing. For example: a Housing Allowance that equals the employee’s salary will trigger an IRS audit because a person doesn’t reasonably spent 100 percent of his or her salary on housing.

So, it’s typically pretty basic! As always, let us know if you have any questions… We’re always here to help!

If you haven’t seen the movie Once, I would highly recommend it. It is truly a great movie… Perhaps one of the best of the year! So, when Audrey and I heard that “The Swell Season” was playing at the Cobb Energy Performing Arts Center, we jumped on it. We ended up purchasing our tickets the day before the show and the concert ended up selling out. So, we had no idea where our seats would be. Box 11, Row 1, Seats C & D. Who knows where that is? When we walked through the front door of the center, the folks scanned our tickets and told us to go down the hallway to the left and give our tickets to the lady standing at the door. So, we did… It seemed like we were walking away from where the crowds were, but oh well, as long as we can hear the music. We showed our tickets to about 5 other ticket takers and they each pointed us further down the hall. Finally, we got to the door to the auditorium and showed our tickets to the seater. He walked us up three stairs and out into the box… Yep, we were those people sitting in the seats where the king and queen usually sit. You know, those weird round box things on the side of the auditorium… Yep, that’s where we sat! The interesting thing was, we had the box that was right at stage level and hung out near the middle. It was dark and the opening act had already started. So, we sat down quitely and listened. She played one more song and the lights came up. I looked to my right to see 3,000 people staring right at us! We were basically sitting on the stage. It was quite uncomfortable, but possibly the best seats I have ever had for a concert. Who would have thunk it… Buy your tickets last minute and end up sitting in the king and queen’s seats. Amazing show! Check out The Swell Season!

If you want, you can take notes like this girl
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Social security taxes are collected under two separate tax systems:

The IRS treats all commissioned employees as self-employed for purposes of social security taxes, but as employees for purposes of state and federal income taxes.

For 2007 FICA, the employee’s share of the Social Security portion of the tax is 6.2% of gross compensation up to a limit of $97,500 of compensation. The employee’s share of the Medicare portion is 1.45% of wages with no limit. The employer is also liable for separate 6.2% Social Security and 1.45% Medicare taxes making the total Social Security tax 12.4% and the total Medicare tax 2.9% of wages.

For 2007 SECA, self-employed people are responsible for the entire FICA percentage of 15.3% (= 12.4% + 2.9%), since they are both the employer and the employed; however, the 15.3% multiplier is applied to 92.35% of the business’s net profit, rather than 100%; the difference, 7.65%, is half of the 15.3%, and makes the calculation fair in comparison to that of regular (non-self-employed) employees. It does this by adjusting for the fact that the employees’ 7.65% share of their FICA tax is multiplied against a number (their gross income) that does not include the employer’s half of their FICA tax. In simpler words, it makes the calculation fair because employees don’t get taxed on their employers’ contribution of the second half of FICA, therefore self-employed people shouldn’t get taxed on the second half either. Similarly, self-employed people also deduct half of their self-employment tax (schedule SE) from their gross income on the way to arriving at their adjusted gross income (AGI). Again, this evens the playing field with regard to regular employees, who don’t pay general income tax on their employers’ contribution of the second half of FICA, just as they didn’t pay FICA tax on it either.

Clear as mud right?

Quarterly Payroll Tax Reporting Requirements

• For Contractors, there are no quarterly wage and tax reporting requirements. It is the responsibility of the contractor to take care of this for themselves.
• For Employees, Form 941 must be prepared and sent to the IRS on a quarterly basis. To go along with that, deposits will need to be made weekly, monthly or quarterly based upon your agreement with the IRS.
• Keep in mind, every locality is a little different. It is very important to be sure to file and deposit any local taxes on a quarterly basis. You will need to check with your local department of treasury to determine what is necessary.

Year End Employer Payroll Reporting Requirements

• For Contractors, Form 1099-MISC must be prepared and sent to the IRS. This Report discloses annual gross wages for every contractor paid more than $600 for services during a year. The Form must be provided to the contract labor recipient on or before January 31. Copies of the forms must be filed to the IRS by February 28 via a W-3 Transmittal Form.
• For Employees, you must complete and submit Form W-2 (Wage and Tax Statement).  This Form discloses an employee’s wages and taxes for a given year. It must be provided to each employee by January 31.

So, these are just some of the requirements for payroll taxes. Bottom line, the IRS doesn’t have much mercy regarding employers vs. employees and how you handle their taxes. It is very important to get this right. As always, we’re happy to help out!

Workers are considered employees if they have many of the following characteristics: continuous standard hours of employment, work full-time or part-time, are subject to dismissal, can quit anytime without penalty, receive business expense reimbursements, are required to follow the organization’s work instructions, receive on-the-job training and receive routine payments of regular amounts.

When a person is paid as a regular employee, the employer automatically withholds and pays all the necessary employee income taxes as required by the IRS. These taxes include: federal income tax, state income tax, FICA (social security and medicare taxes). In addition, the employer will pay all the necessary employer taxes, which includes FICA (social security and medicare). However, churches are exempt from FUTA (federal unemployment) and SUI (sate unemployment insurance) taxes. Your payroll processor will manage all of these calculations and transactions.

Full Time:

Part-Time:

Please note: we recommend hiring part-time employees for 25 hours per week instead of 30 hours per week. The government generally mandates that employers must provide comparable health insurance coverage to all employees who work over 25 hours per week.

Whether an individual is classified as an employee or independent contractor can have far-reaching consequences. This decision ultimately determines an organization’s responsibility regarding FICA, income tax withholding and employer’s benefit plans. Mis-classification can lead to significant penalties.

Independent Contractors

Workers are generally considered Contractors if THEY normally set the order and sequence of work, if THEY work for others at the same time, and THEY are paid by the job. The following payments are usually classified as contract labor transactions:

• Honorariums paid to guest speakers (honorariums seldom, if ever, have income tax withheld)
• Stipends (periodic payments) made to band members (stipends seldom, if ever, have income tax withheld)

Contract labor payments are made at “gross” amount, with no federal, state or FICA withholding. It is the responsibility of the Contractor to file and pay his/her appropriate taxes.

Our good friends over at Circle at Seven helped us out with this one.  Thanks Guys!

More HUGE things to come over here at Ps20… Be on the lookout!  We’re growin, movin and shakin and loving every minute of it!

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