5 Common Tax Issues Ministers Faced This Year (and How to Avoid Them) 🙌💼

Hello Friends! 👋

As tax season winds down (praise God! 🙏), I wanted to share 5 of the most common tax challenges I’ve encountered this year. Some of these issues come up year after year, but a few were new to me this time around. My goal is always to pass along helpful insights that I believe can benefit you. I hope the following information gives you some valuable takeaways! 📚✨

1. Minister’s Housing Allowance and Tax Credits 🏡📊

Here’s a tricky one that can trip up even the most seasoned tax preparers:

✅ The minister's housing allowance is NOT considered earned income for the Child Tax Credit (CTC).✅ But it IS considered earned income for the Earned Income Tax Credit (EITC).

👉 Depending on the minister’s total income, this can either work for or against them since both credits phase out once income reaches certain limits. Be mindful when structuring compensation to avoid reducing the CTC by increasing housing allowance too much.

2. FICA vs. Self-Employment Taxes for Ministers 💰🚫

If you’re a qualified minister and your church is withholding FICA taxes and reporting amounts in boxes 3-6 on your W-2… ❗️That’s a problem.

⚠️ Ministers are dual-status taxpayers — meaning they do NOT qualify for FICA withholding. They’re required by tax code to pay self-employment taxes on their income instead. In these cases, a W-2C should be issued, and 941x’s should be filed to fix the error.

3. Helping Senior Clients with Missing Documents ❤️📄

This year, I had two senior clients whose health had declined, making it difficult for them to locate all their necessary tax documents. One dear client, now 90 years old and in assisted living, sat on her couch in tears because she couldn’t find her forms. 😢

To avoid this heartbreaking situation, I’ve learned that it’s incredibly helpful to get an alternate contact (such as a child or caregiver) for clients once they reach a certain age. I asked for this information last year and, unfortunately, needed it sooner than expected.

4. First-Time Homebuyer Credit Confusion 🏠💸

One situation that frustrated me the most involved a client who paid off their First-Time Homebuyer Credit early, only to have the IRS reject their return due to a supposed balance due.

🚨 If you’re involved in ANY payment plan with the IRS, I highly recommend keeping all your tax returns until at least 3 years AFTER completing the payment plan. Despite the general rule of keeping tax records for 6 years, extended documentation can prevent unnecessary headaches down the road.

5. The Emotional Toll of Tax Season 😅⏳

Every year, I ask myself: ❓ “Do I really want to do this again next year?”

Between software glitches, tax code changes, and unmet client expectations, tax season can be overwhelmingly stressful. But I remind myself that tax season is just that — a season. 🌸

🙏 Until God tells me it’s time for a new season, I’ll continue to serve ministers by preparing their returns. It’s a calling and an honor to help those God has called to preach. In closing, I hope you’re navigating this season with a smile on your face — as this too shall pass. 😊

Final Thoughts 💡✨

If you’re a minister or work closely with one, I hope these insights help you navigate future tax seasons with greater confidence. Staying informed can save both time and money. If you have questions or need assistance, I’m always here to help!

➡️ Have a blessed and peaceful end to tax season! ~ Michelle