Tax season is once again upon us! Here are several reminders concerning tax issues that you may face. We trust that this information will be useful to you, both in giving you a better understanding of your reports and helping you to be aware of items that may affect your personal taxes.
Change from W-2 Forms to 1099 Forms This Year
World Wide Missionaries have always been considered dual status, in that you were self-employed but received a W-2. Following advice from our CPA and tax attorneys, starting with the tax year 2019 we are no longer issuing W-2 Forms, but began instead to issue 1099 Forms to our missionaries. When completing your tax return, you may want to ask your tax preparer about how the Tax Cuts and Jobs Act (TJCA) affects self-employed individuals. It is our understanding that you may be able to submit an amended return for the year 2018 if you did not fully take advantage of the TJCA benefits when you filed last year.
Tax Paperwork for 2019
Tax-related paperwork generated by WWNTBM is in your SecureCloud folder. This includes your applicable 1099 form, MFR Summary Report, Tax Detail Letter, and Tax Receipts (if you gave through WW in 2019.) Please be sure to look at the second page of the MFR Summary, to see if there are any specific notes for you and your tax preparer. The Tax Details letter is a vital document for you to provide to your tax preparer if you had a housing allowance or if WW submitted estimated taxes for you. If you requested that we submit your tax information directly to your tax preparer, please note that those documents will be sent in mid-February. This is to ensure that there is time for us to include any forms that may arrive in our office from other sources. If you have any questions, please contact Naomi.
1099 Forms from Other Sources
If churches issued funds payable to you in excess of $600 during the year 2019, they may issue you a 1099 form. If those funds were either mailed to the office or included on Line 2 of your MFR as extra income, they are already included in the total of your 1099 from World Wide. Our office can assist you in verifying whether the funds were included in your 1099. Your tax preparer can assist you on your return in recording this so that you are not taxed twice on the same income. We recommend that you request churches to make checks payable to WWNTBM to avoid this issue in the future.
Foreign Tax Exclusion
In order to claim the foreign tax exclusion, you must be out of the US for 330 days over a 12 month period of time; however, these days do not have to be in the same calendar year. In order to gain the full benefit of the foreign tax exclusion, your tax preparer may be able to revise your returns based on the actual time you have spent overseas. Because of this, it is vital to provide your tax preparer with all of your travel dates to and from the US. You may also wish to discuss with them what the best travel dates would be when planning to leave for the field or return on furlough, as this could affect how much you are allowed to claim under the foreign tax exclusion.
It is our understanding that, while the Foreign Tax Exclusion does benefit many of our missionaries, it may not always be the best solution, as there are other situations which may give a greater benefit. Some of those options may affect taxes not only for this year but for future years as well. This is another reason we recommend consulting a tax professional who can advise you in relation to your unique circumstance.
Healthcare and Your Taxes
Our financial report gives a location for you to track ‘health insurance costs.’ However, each individual situation is different. Some use this area to record traditional health insurance, some use it to record expenses through the Marketplace, and others use it to record details for a health care sharing ministry such as Samaritan Ministries. While all of these are health-related costs, each of the examples affects your taxes in a different way. Please be sure that your tax preparer is aware of the details of your health coverage, as it may affect how they complete your tax return.
Estimated Tax Payments
Missionaries are considered to be self-employed and are therefore subject to self-employment taxes. Submitting quarterly estimated tax payments throughout the year will help to prevent having a large tax payment due each April. In addition, if you will owe at least $1,000 in taxes, the IRS requires self-employed individuals to submit quarterly estimated tax payments. Estimated tax payments can be submitted on your own, or, if you are interested, you may contact Kim O’Malley for information on how we can submit them for you.
Tax Paperwork for those with Foreign Bank Accounts
US Treasury Department regulations require that if you have any foreign bank accounts, and if the sum total of all of your foreign accounts has ever been $10,000 at any given time during the past year, you must complete the IRS Foreign Bank and Financial Account Form (FBAR) and give it to your tax preparer. This includes all foreign accounts on which you are a signatory, such as a ministry account. This form, and further information about it, is available on the IRS website at www.irs.gov. Please refer to the IRS website and your tax preparer if you have any questions.
Utilizing a Tax Professional
Studies have shown that the average person who uses a tax professional, instead of filing their own taxes, receives a much greater tax return. The savings far exceed the amount spent to hire a professional. Many have also found that using tax software does not always compare to the benefits of using a professional, either. In many instances, it is not that the software or the self-filer is wrong, but that other choices may be better. (Information is taken from daveramsey.com.)
It is also good to note that not all professionals are familiar with tax situations that might affect you. We encourage all missionaries to use a certified tax preparer who is familiar with special tax situations that affect missionaries and those living overseas. A listing of tax preparers used by other missionaries is available on SecureCloud, under the Forms and Manuals section.
Items to Provide to Your Tax Preparer
In addition to your 1099 Form(s), MFR Summary, and Tax Details Letter from World Wide, you may wish to provide the following to your tax preparer as it will assist them in filing your taxes.
- List of dates you were in the US vs out of the country during the year.
- Details of all housing-related expenses, to be used in addition to the amount of your Approved Housing Allowance, for use in completing Worksheet 1 of IRS Publication 517.
- Information on any retirement plans you have contributed to during the year, or that you have received distribution from during the year.
- Names and Social Security Numbers for all family members.
- Names and dates of any family births or deaths (children or spouse), as well as whether you were married during the year.
You may need to submit taxes in your foreign country, as well as in the US. Consult with a local tax preparer about this possibility. This may be especially true if you receive funds from that country.