THIS IS OPINION AND IS NOT LEGAL OR FINANCIAL ADVICE. FOR LEGAL OR FINANCIAL ADVICE, SEE A COMPETENT PROFESSIONAL IN THE FIELD OF YOUR INTEREST.
PART I. RECOVERY REBATES
Pastors and employees of a ministry will automatically receive a recovery rebate provided (1) you are a U.S. resident with adjusted gross income under $75,000 ($112,500 for head of household and $150,000 married), and (2) have a work-eligible SSN, and (3) you filed a tax return for 2018 or 2019.
The full rebate is $1,200 ($2,400 married). If you have children, you are also eligible for an additional $500 per child. Income between the phase-out threshold and complete phase-out. The amount is completely phased-out if your income exceeded $99,000, $146,500 for head of household filers with one child, and $198,000 for married couples with no children.
No money owed to the IRS (administrative offsets) will be taken out except past-due child support payments.
PART II. FEDERAL ASSISTANCE AVAILABLE TO PASTORS OR MINISTRY STAFF THAT HAVE LOST THEIR JOBS.
COVID Phase III Stimulus Package provides specific provisions that will allow pastors or ministry staff who have lost their jobs to apply for unemployment benefits.
PROVIDES FEDERAL FUNDING OF EXPANDED UNEMPLOYMENT BENEFITS
Appears to provide a flat amount of $600 per week in addition to what an individual may qualify for under state unemployment systems. Details TBD – expanded benefits funded by the federal government will be administered by state unemployment agencies (Alabama Department of Labor)—Mike Batts
Provides unemployment benefits to unemployed workers from churches, religious organizations, and small nonprofits where employment would not normally be covered under state unemployment law (understanding confirmed by US Senator’s office)—Mike Batts
Details TBD – expanded benefits funded by the federal government will be administered by state unemployment agencies (Alabama Department of Labor)
PROVIDES FEDERAL FUNDING TO ASSIST NONPROFITS
Provides federal funding to assist nonprofits that have elected the reimbursement method for participation in state unemployment coverage
Details TBD – expanded benefits funded by the federal government will be administered by state unemployment agencies (Alabama Department of Labor)
PART III. ACCESSING RETIREMENT PLAN ACCUMULATIONS
EARLY DISTRIBUTIONS (WITHDRAWALS)
The Stimulus package allows you to take money out of your retirement account to pay for coronavirus-related expenses incurred during the COVID Pandemic. The law waives the 10% early withdrawal penalty for distributions up to $100,000 from qualified retirement accounts for coronavirus-related purposes made on or after January 1, 2020. The money you take out (distribution) is income and would be subject to tax over 3 years. The law allows you to re-contribute (put the money back) in an eligible retirement plan within 3 years with no cap on that year’s contributions. A coronavirus-related distribution is a one made to an individual: 1) who is diagnosed with COVID-19; 2) whose spouse or dependent is diagnosed with COVID-19; or 3) who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of childcare due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19, or other factors that may be established by the government in the future.
LOANS
The law provides flexibility for loans from certain retirement plans for coronavirus-related relief.
PART IV FINANCIAL ASSISTANCE AVAILABLE TO CHURCHES
NOTE: EMERGENCY PAID LEAVE ACT OF 2020 (EPLA)
Under the (EPLA) employers having less than 500 employees must provide paid sick leave to employees who:
- have COVID-19,
- must quarantine at the order of a public health officer or cares for an individual with COVID-19 or must quarantine upon an order from a public health officer, or
- must care for a child because the child’s school or daycare closed due to COVID-19. Each employee is entitled to (1) their regular rate of pay if sick with coronavirus or quarantined or (2) 2/3 their rate of pay if caring for a sick person or a child where the school or daycare closed. After two weeks of sick leave, the employee may take up to 12 weeks of paid leave up to $200 per day (mandated portion). Payroll Tax Credit
TAX DEFERRAL
The Stimulus provides a refundable payroll tax credit for 50% of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose 1) operations were fully or partially suspended due to a COVID-19-related shutdown order, or 2) gross receipts declined by more than 50 % compared to the same quarter in the prior year. The employer may recoup a portion of the costs of the two weeks’ sick pay or family leave through a tax credit against the employer portion of FICA tax or through a payroll tax deferral. These rules are complicated and the church should receive assistance from a CPA for this process. Paycheck Protection Program
Small businesses including churches with under 500 employees may take advantage of the Small Business Administration loan program called Paycheck Protection. To qualify, the church must have been impacted economically by the pandemic. The money will be used to retain workers and may also include business rent or mortgage payments and utilities. Eight weeks of payroll, rent/mortgage, and utilities may be forgiven beginning from the start date of the loan. To receive the full benefit of loan forgiveness, the church would want to keep 100% of the employees on staff and must be at pre-decline employment levels on June 30, 2020. For example, if the worker’s strength is at 50%, the loan forgiveness would be approximately 50% of the remaining employees.
EMPLOYEE RETENTION CREDIT
Churches may participate in this program designed to keep workers on the job. The church is allowed a credit against employment taxes. The business qualifies even if there are laid-off workers. There must have been a 50% reduction in income compared to the same quarter last year. Those with less than 100 employees may receive a 50% credit for all wages paid.
Have your lawyer read and explain so you understand any document(s) you sign!
Note that the employer may not receive both the Employee Retention Credit and the Paycheck Protection loan forgiveness.
CHARITABLE CONTRIBUTIONS INCENTIVES
ABOVE THE LINE TAX DEDUCTION
- charitable deductions of up to $300 to churches and charitable organizations in 2020 without itemizing.
- increases the maximum deductions for charitable contributions. For individuals, the 50% of adjusted gross income ceiling is suspended for 2020. For corporations, the 10% ceiling is raised to 25% of taxable income.
- raises deductions for contributions of food inventory from 15% to 25%.
PART V. DISCLAIMER
The Alabama Baptist State Board of Missions does not provide tax, accounting or legal advice. For purposes of Circular 230 and unless expressly stated otherwise above, nothing contained in this message, either in the body of the email or attached separately, was intended or written to be used or may be relied upon or used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.
James Swedenburg with Lee Wright.
This is an opinion and is not legal or financial advice. For legal or financial advice, see a competent professional in the field of your interest.
by Dogwood