Podcast – “Let’s Talk Church Finances” w/ Delano Sherley – Woodlawn Talks – Episode 64
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Online third-party payments exceeding $600 must be reported
Beginning in 2022, a 1099-K from must be prepared for any third-party payment platform transaction greater than $600 made via processors like Venmo and PayPal. This is a change from the previous requirement that online payment processors provide a 1099-K only if gross income exceeded $20,000, or if there were at least 200 separate calendar year transactions.
This new requirement comes from 2021 changes in the U.S. tax code and Internal Revenue Service rules that came into effect through the American Rescue Act. Since the change significantly lowers the threshold for reporting it will affect individuals and small businesses due to an anticipated increase in taxes and audits.
The IRS requires Form 1099-K, Payment Card and Third-Party Network Transactions for reporting certain payment transactions as a means to improve tax compliance. It is not intended to track personal transactions. The new rule applies only to payments received for goods and services, not for personal expenses such as sending gifts, paying rent, or reimbursing friends or family. In addition, people who sell a personal item at a loss are excluded from this rule.
On Dec. 23, 2022, the IRS announced that calendar year 2022 will be treated as a transition year for the reduced reporting threshold of $600. For calendar year 2022, third-party settlement organizations who issue Forms 1099-K are only required to report transactions where gross payments exceed $20,000 and there are more than 200 transactions.
You should have received Form 1099-K by January 31, 2023.
Year-End Contribution Rules
Here is a memo you can share with your donors that explains the year-end rules and deadlines regarding contributions.
To ensure the deductibility of your church contributions, do not file your 2022 income tax return until you have received a written acknowledgment of your contributions from the church. Under IRS rules, you may lose the deduction if you file your tax return before receiving the written acknowledgment from the church.
(Canceled checks are no longer considered by the IRS as proof of a contribution.)
For a contribution to be included on your 2022 contribution statement, the contribution must be delivered to the church (or postmarked) on or before December 31, 2022. No exceptions! Contributions received after this date – regardless of the date of the check – will be recorded on your 2023 contribution statement.
Also, the IRS permits taxpayers to deduct either the actual transportation costs incurred in performing charitable work, or a standard mileage rate of 14 cents per mile.
2023 HSA and HDHP
2023 HSA and HDHP
Contributions and Out-of-Pocket limits
Health savings account (HSA) contribution limits for calendar year 2023 are increasing in response to the recent rise in inflation.
The contributions can come from the employer, employee deductions via payroll or a combination (i.e.: the employer can match the amount that the employee has withheld). matching to support employees’ ability to handle increased health care costs.
| Contribution and Out-of-Pocket Limits for Health Savings Accounts and High-Deductible Health Plans | |||
| 2023 | 2022 | Change | |
| HSA contribution limit (employer + employee) | Self-only: $3,850 Family: $7,750 |
Self-only: $3,650 Family: $7,300 |
Self-only: +$200 Family: +$450 |
| HSA catch-up contributions (age 55 or older) | $1,000 | $1,000 | No change (set by statute) |
| HDHP minimum deductibles | Self-only: $1,500 Family: $3,000 |
Self-only: $1,400 Family: $2,800 |
Self-only: +$100 Family: +$200 |
| HDHP maximum out-of-pocket amounts (deductibles, co-payments and other amounts, but not premiums) | Self-only: $7,500 Family: $15,000 |
Self-only: $7,050 Family: $14,100 |
Self-only: +$450 Family: +$900 |
HSA Contribution Details
*HSA contributions are adjusted for inflation annually against the Consumer Price Index. Catch-up contribution limits are fixed by statute.
* Married couples with HSA-eligible family coverage will share one family HSA contribution limit of $7,750 in 2023. If both spouses have eligible self-only coverage, each spouse may contribute up to $3,850 in separate accounts.
* If both spouses with family coverage are age 55 or older, they must have two HSA accounts in separate names if they each want to contribute an additional $1,000 catch-up contribution.
* If only one spouse is 55 or older but the younger spouse contributes the full family contribution limit to the HSA in his or her name, the older spouse must open a separate account to make the additional $1,000 catch-up contribution.
* Account holders who exceed the contribution limit are subject to an annual 6 percent excise penalty tax on the excess amount unless it is withdrawn from the HSA before the tax deadline for that year.
Annual out-of-pocket limits for ACA-compliant plans (HHS) v/s HSA-qualified HDHP plans (IRS)
| 2023 | 2022 | |
| Maximum out-of-pocket for ACA-compliant plans (HHS) | Self-only: $9,100
Family: $18,200 |
Self-only: $8,750
Family: $17,400 |
| Maximum out-of-pocket for HSA-qualified HDHPs (IRS) | Self-only: $7,500Family: $15,000 | Self-only: $7,050Family: $14,100 |
- ACA-compliant plans (HHS) – Out-of-pocket limits established by the Department of Health and Human Services (HHS).
- The HHS’s annual out-of-pocket limits are higher than those set by the IRS. To qualify as an HSA-compatible HDHP, a plan can’t exceed the IRS’s lower out-of-pocket maximums.
Labor Law Posters
All businesses with employees are required by law to post certain notices in a place where employees can see them (ie: break room or near a time clock). There are both federal and state posting requirements. Federal requirements include notices informing employees of the federal minimum wage, equal employment opportunity, family and medical leave act, occupational safety and health and others. Postings for states vary, but if you have employees, you need to be aware of which postings are required. If the proper notices are not displayed, you can be assessed a fine.
We recently received a mailing from a company that sells the required posters. While the notice looked official, it was from a company that overcharges for the posters, which you can get for free from federal and state websites. For example, the Ohio Department of Administrative Services website has detailed instructions on posting requirements, links to the posters or which governmental office to get them from, as well as points of contact for questions. Also, many payroll companies will also provide a copy to you for free or a nominal charge. If you use our on-line payroll system, we offer this service for free.
Please read the fine print of any notices you receive and be careful not to pay for services unnecessarily.
How to manage digital money transfers safely
The ability to utilize electronic payment networks to send or accept cash is becoming more prevalent and easier than ever. However, so does the risk of fraud and scams because cybercriminals know that funds moved electronically are hard to trace and/or recover since there is not a physical check to represent the transaction.
When transferring money online it’s not always possible to know exactly who is on the receiving end of the funds which allows cybercriminals to defraud the payer through fraudulent or unauthorized transactions and data theft.
Recently there has been an increase in cybercriminals scamming people into online wire transfers and payments using the Zelle payment network by tricking users into sharing sensitive information.
Despite legitimate banks and online merchants facilitating Zelle (and other payment options) fraud can still occur as cybercriminals exploit opportunities in the transfer process. For example, Zelle only requires the email address or mobile phone number associated with a Zelle account in order to move funds. This convenience comes with increased risk as Zelle doesn’t have the same protections against fraudulent charges as credit cards or debit cards and the only way to cancel a Zelle payment is if the recipient hasn’t yet enrolled in Zelle. If the recipient is already a Zelle user, the payment cannot be canceled.
Suggested safeguards:
- Don’t disclose personal information without verifying the legitimacy of the source of the request. If needed, reach out to the company directly
- Don’t make your account access easy to guess or discern with limited knowledge of your personal information (ie: pet name, common phrases, etc.)
- Utilize 2-factor authentication for added protection
Never use Zelle when:
- Someone claims to be from a government agency
- You do not know the person making the request (ie: telemarketer)
- Someone claims your account is compromised
- Anyone asks you to send money to yourself
- A friend, relative or coworker has reached out online (without verifying via a phone call that they actually sent the request)
2022 Mileage Rate Increase
The IRS has updated the 2022 mileage reimbursement rates to account for the rising cost of gas. Effective July 1, 2022 the new rate for business related travel increased $0.04 from $0.585 per mile to $0.625. Driving for medical purposes may be deducted at $0.22 per mile and mileage for service to a charitable organization is unchanged at $0.14/mile. Mileage for moving expenses is no longer deductible.
You also have the option of calculating the actual costs of using your vehicle instead of using the standard mileage rate. However, you will still need to keep a mileage log to be able to calculate what percent of your actual expenses are deductible.
Remember – miscellaneous deductions (which includes unreimbursed employee expenses and home office deductions) are no longer deductible. Therefore, we recommend that employees get reimbursed for business mileage and other business expenses. If, however, you file form schedule C you can still deduct the mileage and home office deductions (this applies to self-employed individuals).
If you are a minister subject to Self-employment taxes, any unreimbursed mileage can be used to reduce your self-employment taxes (but not your federal income taxes).
We are here to help if you have any questions.
Changes To Your Credit Score
A low credit score can have significant consequences. It determines the interest rates on your credit cards and loans, how much you pay for insurance and can also impact your ability to open a bank account. You should review your credit report several times per year to make sure that there no errors that could have a negative impact on your score. This is also a good time to review for any potential fraud, such as someone who opened up a new account using your social security number.
Often, financial hardship is the result of unexpected medical bills. One in five households have medical related debt. One result of late medical bill payments is a lower credit score. Beginning in July 2022, the 3 major reporting agencies are making changes to the way they calculate credit scores. These changes include removing approximately 70% of medical debt and increasing the grace period on medical debt from six months to twelve months. Beginning in 2023, they will no longer report on any past due medical bills that are under $500.
Tax Season Is Here!
The IRS increased the reimbursement mileage rate from $0.56 to $0.585 per mile in 2022. Medical mileage rates increased from $0.16 to $0.18 and charitable mileage remained the same at $0.14 per mile.
The last couple of years have been challenging if you have needed to get in touch with the Internal Revenue Service to resolve any issues. Many are still waiting for refunds from last year, with no valid reason for a delay in processing that refund.
National Taxpayer Advocate Erin Collins warned Congress that the upcoming tax filing season will be the most challenging on record as taxpayers must navigate new tax code complexities and an overwhelmed IRS. Collin’s’ annual report to Congress details issues that will complicate the filing season. They include millions of unprocessed tax returns for previous years, increasing poor phone service and complications with pandemic relief program. IRS call volumes spiked from 100.5 million 2020 to 275 million in 2021. The IRS answered 11% of calls in 2021 vs 24.1% in 2020. Think about that….only 1 in 10 calls to the IRS get answered. One problem cited for contributing to the IRS backlog is the number of paper returns filed.
If you need assistance, your tax preparer should be able to get through quicker on a dedicated preparer hotline…but it will still take longer than in prior years. If we can be of assistance, please call our office.