A Law that may actually help your church

It seems that all I have been writing about lately is bad news!  For a change, there is some good news for churches and ministries!  On March 18th, 2010 a law was passed that may make it the best time ever for the church to hire the pastor or another employee.  The Hiring Incentives to Restore Employment act (HIRE) provides the church/ministry an exemption on payroll tax if they hire a new employee and a $1,000.00 tax credit if they keep the employee for at least 52 straight weeks. 

What are the details of the HIRE act?

Below is a list of benefits followed by a list of requirements.

Benefits

1.     The church will not have to pay the employer's share of social security on the individual's salary.

2.     The church will also get a $1,000.00 tax credit.

Requirements

1.     The employee has to be hired after February 3rd, 2010 and January 1st, 2011.

2.     The newly hired individual must stay employed by the church for at least 52 straight weeks.

3.     The employee must have been without a job for the 60 days prior to being hired by the church or worked less than 40 hours for someone during the previous 60 days.

4.     To get the credit every qualifying employee must fill out a W-11 form and turn it in to the church.

The IRS position on who qualifies

The most recent IRS posting (IR-2010-33) states that all tax-exempt organizations qualify for the credit.  The exemption is filed with the quarterly 941 return, which is being revised to allow the claim for the exemption.  As for the $1,000.00 credit, it remains questionable as to the process for receiving it, because in order to receive the credit a church must file a tax return.  Churches are exempt from filing tax returns.  We must wait a little longer before the IRS publishes guidance on how churches will get their tax credit.  I am sure we will soon know.

Now may be the time!

If your church/ministry has thought about hiring, now may be the time.  The church does not have to pay a certain minimum amount in salary in order to qualify for the credit.  It simply has to follow this format: beginning the first week that the salary is paid, count 52 total weeks and then make sure that whatever total amount is paid out during the second 26-week period is at least 80% of the total that is paid out during the first 26-week period.  For example, if John Doe receives a total of $10,000 during his first 26 weeks as a paid employee of the church, then he must also receive a minimum of $8,000.00 total during the second 26-week period of the year.