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. Please be sure that you are following published guidelines found in your Missionary Orientation Manual when listing expenses on your financial reports. Thank you!
Tax Paperwork for 2016
Tax related paperwork generated by WWNTBM will be in your SecureCloud folder on February 1st. This includes W-2 forms, MFR Summary Reports, and Estimated Tax letters. Be sure to look at the 2nd page of the MFR Summary, to see if there are any specific notes for you and your tax preparer. If you requested that we submit your tax information directly to your tax preparer, please note that those documents may not be sent until mid- to late 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.
The Affordable Care Act and Your Taxes
The Affordable Care Act (ACA) will affect your taxes in regards to your Health Insurance coverage. If you are enrolled in the Health Insurance Marketplace, you should expect to receive a Form 1095-A from the Marketplace, which you will need to submit to your tax preparer. If you were not enrolled in the Marketplace, you will still need to discuss your Health Insurance plan with your preparer, as it is our understanding this will affect your tax return this year.
It is our understanding that US residents living overseas who have returned to the US for more than 35 days in 2016 may also be subject to specific fees regarding the Individual Shared Responsibility Provision of the ACA. Information about this is available on the IRS website by clicking here.
Questions about this should be directed to your tax preparer.
1099 Forms
If churches issued funds payable to you in excess of $600 during the year 2016, 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 W-2. Our office can assist you in verifying whether the funds were included on your W-2. 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 ask churches if they could 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 your tax preparer what dates would be the best travel dates when planning to leave for the field or to return on furlough, as this could affect how much you are allowed to claim under the foreign tax exclusion.
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. Estimated tax payments can be submitted on your own, or, if you are interested, you may contact our office for information on how we can submit them for you.
Tax Paperwork for those with Foreign Bank Accounts
US Treasury Dept. 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. It is our understanding that there have been several changes to these requirements in recent years, and you may also need to complete Form 8938. Please refer to the IRS website and your tax preparer if you have any questions.
Ministry Bank Accounts
If your ministry has been chartered and established as a non-profit organization, we recommend having your ministry get a bank account in its name. Funds for purchases such as land may be able to be sent directly to your ministry, thus eliminating your personal tax liability. Please note that there are limitations to this option. Of course, regular support could never be sent this way. Please contact our office for more information.
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. When comparing the returns of those who self file vs. those who use a tax professional, it is estimated that a self-filer loses between $297 and $791 in missed refunds. The savings far exceeds 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 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. A list of tax preparers used by other missionaries is available on SecureCloud, under the Forms and Manuals section.