Too Taxing to be Accurate?
Scott Simon, in his essay “A Simpler Tax Code” last week on NPR put it well: “the U.S. tax code is 67,204 pages long — about as long as 112 copies of James Joyce’s Ulysses. And just about as comprehensible.”
I’ve spoken to several of my brightest friends. These folks hold masters degrees, preach inspiring sermons, consistently find their children on the playground, and haven’t lost their keys for several days. We are all in agreement: we are far from certain our taxes are 100% accurate.
I did my taxes — or got a good start — last weekend. I didn’t have many chauffeurs this cycle, so I’m still waiting for that call from Obama. But heck, taxes are complicated. Way too complicated.
Megan and I have income from several states, run our own “writing businesses” (in other states, of course) give a fair amount away, and earn interest on a piece of swampland in Florida that someone sold us a few years back. When I do my taxes I think, “Come on, self, you got an A+ in your college math class.” And then I stare at the blank boxes for another five minutes (ok, the math course was “Math 101″ in a summer term at the University of Hawaii; I think I was the only student who showed up every day…and cared at all.)
And don’t even get me started on minister’s taxes. A tax professional told me recently that, when ordained, I’d have to seek out a tax professional who specialized in pastor’s taxes. Wait?! They’re so complicated that even tax professionals can’t do them? Yikes!
So I have a little sympathy for Tom Daschle (and Timothy Geithner and Nancy Killefer). Just a little for Tom, though, as I don’t think any unseated senator should earn $5 million from a lobbying law firm while claiming he’s neither a lobbyist or practicing law.
I better stop there. And to any blogging IRS agents, you’d be wasting your time with an audit. We don’t make much, and I’m pretty sure we over pay.
image by Linda Long
Connect Online
I’d suggest TurboTax. I’ve used it for years. And it does know how to handle clergy taxes. Yes, clergy taxes are complicated, but I am reasonably sure TurboTax gets it right. And I’m not a shill for TurboTax, I’m a real preacher who reads your blog.
I do my own tax return, and don’t think it’s that complicated. For Self-Employment taxes you have to figure in the value of a Manse or Housing Allowance, then pay 15.3% on 92.35% of your cash salary plus allowances. (A manse is valued at 30% of your cash salary, so the formula is 1.3 X cash salary X .9235 X .153). It’s all right there in black and white on Form SE and it’s instructions. We’ve got 3 kids, so there aren’t any income taxes for us to pay, other than the Self-Employment taxes. (You only figure in the value of the Manse for SE taxes, not income tax which is reported on your W-2′s.)
When we had received the first call, I negotiated the compensation that was offered. Rather than go for the cash salary they offered, I asked for less in salary, and more in allowances. So, I’ve got a hefty “Professional and Educational Expenses” allowance. The allowances can’t be something that is paid 1/12th each month (which would make the allowance taxable) – it most be documented with receipts for each item. I knew that I wanted to buy some books, and go to some nice educational seminars. I pay less in Self-Employment taxes this way, and have money sitting there to be used for education and books and the like (must use it each year, or lose it).
After Easter, I’m headed to India. Professional and Educational Expenses will pay for my airfare, while someone in the congregation offered their credit card points to buy my wife’s ticket. A couple of pastors there will put us up and feed us. I expect it to be very educational – but most pastors don’t have an allowance big enough to pay for something like this. In two weeks there, I’m to preach 7 times (sermons are generally about an hour or more there, and churches are packed with hundreds of people), and I’ll also lead devotions a couple times in a Bible College (which also runs about an hour). We’ll help at a Mission School as well. I’ll talk with quite a few pastors, and learn much – I’m certain.
I need this connection to my brothers and sisters in Christ in Asia. It will feed my soul, and inform my preaching here. Next year I hope to go to Uganda. I’ve got pastor friends there as well as India. These are not vacations, but opportunities to bless and be blessed in the name of Christ.
I understand how many of those who do tax returns don’t want to learn the details of Clergy taxes. It does take several hours investment in reading extra documentation. But once you understand it, then it’s not that difficult. Maybe I should be quiet though, as I don’t know many pastors who do their own. I started out as an accounting major, but found it way too boring, and ended up with a B.S. in Management. My next degree was in computers, and I enjoyed writing lines of very technical code (which is so much easier today with “Visual Basic” etc).
Maybe it’s harder for others than I realize, but income tax forms don’t seem that difficult to me. I figure out how everything is figured, and I have an Excel spreadsheet programed to help me make sure I don’t mess anything up on estimated taxes or income taxes. Maybe I should write some documentation into the spreadsheet so that others can figure out how to figure their taxes?
I hadn’t thought about doing this previously – though I wonder at my liability if I don’t include every detail (including stuff that doesn’t pertain to the majority). Guess I could offer it for free with a hefty disclaimer. Oh well. The final quarterly estimated taxes payment is due January 15, unless you file taxes by Feb. 1. So, I’ve already paid my taxes for 2008.
I don’t like knowing what people contribute to the church, and I don’t think I’d like to know about the compensation of other pastors – so I don’t think I’d want to do taxes for other clergy. I’d just rather not know about it – so there isn’t a temptation to be jealous.
Sorry to ramble so much. Just thought I’d provide a counterpoint to the idea that it requires a genius to figure taxes. And I want readers to think about compensation – higher cash salary leads to higher taxes (though you have to actually have a valid and helpful use for reimbursed allowances).
DennisS makes good points, esp. about how you negotiate compensation and document allowances. I’m thinking of doing my own next year as mine are pretty straightforward. BUT in the past- and this year – I’ve had the same accountant do my taxes for going on probably 21 years – He is good at clergy/self-emplyment taxes and charges reasonable rates – has my history, stays current, and has probably saved me momey in the long run. I keep good documentation/budget info as you probably do – so it’s easy to get figures together for him. I’d encourage you to consider finding a competent accountant/tax/investment advisor at some point – will probably become a valuable resource.
Thanks, folks. DennisS, I do think your accounting mind comes through pretty quickly in all that
I get taxes, but I’m saying they are way too complicated for the average person. Also, when filing in several states and receiving income from several others it gets a bit tricky when dealing with inter-state regulations.
And little things like: if the church pays for your cell phone it’s supposed to be taxable income, do make me wonder if our system is a bit antiquated.
Peace.
To save myself a headache, I’ve sent my taxes off to a CPA who specializes in clergy taxes. At first, I was hesitant to spend the money to get my taxes done, but I’ve decided it will be worth it in the long run for me. I’ve got all my info organized and categorized, so I’m not paying her to sort through receipts or anything. I’m filing in multiple states, lived in multiple states, and gained clergy status half way through the year. Plus, when I was “interviewing” her over the phone and deciding if I wanted to go with this particular person, she had helpful hints about specific ways for me to get the most out of my call package by shifting some things around.
TurboTax has been suggested to me by multiple pastors. Some day I may do my own taxes. For now, the money spent on a CPA doing them will be worth the free weekend.