Transparency In Ministry

> May 15 - Deadline for calendar-year exempt organizations to file 2006 information returns. (Commonly referred to as the 990's).

May 31 - Deadline for IRA, SEP, SIMPLE, Roth IRA, MSA, and education savings account trustees to file annual statements (Form 5498) with the IRS, with copies to participants.

NOTE: Businesses are required to make federal tax deposits on dates determined by various factors that differ from business to business.

Payroll tax deposits: Employers generally must deposit Form 941 payroll taxes (income tax withheld from employees' pay and both the employer's and employees' share of social security taxes) on either a monthly or semiweekly deposit schedule. There are exceptions if you owe $100,000 or more on any day during a deposit period, if you owe $2,500 or less for the calendar quarter, or if your estimated annual liability is $1,000 or less.

Monthly depositors are required to deposit payroll taxes accumulated within a calendar month by the fifteenth of the following month.

Semiweekly depositors generally must deposit payroll taxes on Wednesdays or Fridays, depending on when wages are paid.

For more information on tax deadlines that apply to your business, contact our office.

The IRS is warning taxpayers about Internet scams and fraudulent e-mails that appear to be from the IRS. The e-mails direct the taxpayer to a Web link that looks like the genuine IRS site and requests information such as the individual’s social security number and bank account or credit card numbers. This information is then used by the scammers to steal from the victim’s bank account and run up charges on his or her credit card.

What do these scams look like? See post #2 on the fraud series.

If you benefit from these posts and would like to be a subscriber...check out the icon to the right of these posts and sign up to be a transparency in ministry subscriber...no cost!

A donor-imposed condition relates to a future specified event whose occurence or failure to occur gives the donor a right of return of the assets transferred. Failure of the condition releases the donor from its obligation to transfer assets promised.

How do you record? The assets transfered (fair value) are recorded as:

DR - Assets
CR - Deferred Revenue

The revenue has not been earned until the specified event occurs, thus meeting the "deferral" definition.

Filing your 2006 tax return might signal the official end of 2006, but for tax-savvy individuals, it’s also the kick-off for saving taxes in 2007. Getting an early start on your 2007 tax planning will help you take maximum advantage of the latest tax breaks, inflation adjustments, and retirement options.

there are several considerations and during the next several posts, we will discuss some of these planning tips:

First, commit to maximizing your retirement plan contributions. This will lower your 2007 taxable income and enhance your nest egg to boot. If you have an IRA, consider making contributions earlier in the year to reap extra tax-deferred earnings.

Second, minimize any surprises next year by examining your paycheck withholdings now. Are tax withholdings on track with your current financial situation? A large tax refund or amount due on your 2006 return might require an adjustment to your Form W-4 for 2007. Additional factors to consider include recent changes to family income, a new home, or children no longer qualified as dependents.

See Post #2 for additional tips.

As discussed in post #1 of this series on e-mail fraud...

The IRS is warning taxpayers about Internet scams and fraudulent e-mails that appear to be from the IRS. The e-mails direct the taxpayer to a Web link that looks like the genuine IRS site and requests information about the taxpayer.

The schemes have several variations, including notification that the taxpayer is eligible for a refund, a claim that the taxpayer’s credit card has been used to pay another person’s taxes, and instructions to send money to claim a large lottery winning. None of these schemes has anything to do with the IRS; they are all scams to snare the unwary taxpayer.

If you receive an e-mail claiming to be from the IRS, you should not open any attachments or click on any links in the e-mail. Instead, forward the e-mail to the IRS at phishing@irs.gov so that it can be investigated.

According to the April 2007 issue of the Church Treasurer Alert!

The U.S. Department of Labor's Bureau of Labor Statistics, has released a study for the private employer costs for employee compensation. Employee compensation averaged $25.52 per hour worked in 2006. Wages and salaries, which averaged $18.04, accounted for 70 percent of these costs, while benefits, which averaged $7.48, accounted for the remaining percent.

The following represented other average compensation/benefit issues:

Employer costs for insurance benefits - $1.89/hour
Legally required benefits (Social security, medicare, unemployment, etc) - $2.18/hour
Paid leave benefits (vacation, holiday, sick leave) - $1.73/hour
Retirement and savings benefits - $.93/hour

Where does your ministry or church fit in the above study?

Need help with compensation/benefit issues? Contact us.

Now that you have filed your 2006 tax returns, it is time to start making plans for 2007. Getting an early start on your 2007 tax planning will help you take maximum advantage of the latest tax breaks, inflation adjustments, and retirement options. Consider the following planning tips:

A law enacted last year extends the age threshold for taxing children’s unearned income at the parent’s higher tax rate. Now the "kiddie tax" applies until the child reaches age 18. This might be a good year to consider a 529 college savings plan as an alternative to transferring funds directly to a child’s account.

And don’t forget to take advantage of available energy tax credits this year. Qualified home improvements can trim your utility bills and lower taxes at the same time.

Now that you have filed your 2006 tax returns, it is time to start making plans for 2007. Getting an early start on your 2007 tax planning will help you take maximum advantage of the latest tax breaks, inflation adjustments, and retirement options. Consider the following planning tips:

Staying abreast of new tax laws is always a good idea, and this year is no exception. For instance, taxpayers age 70½ and older can now make charitable donations directly from their IRA without paying tax on the distribution. In addition, the payments satisfy the required minimum distribution obligation. So if you are charitably inclined and don’t need your IRA distributions to live on, this might be a winning strategy.

The most common tax-related resolution — and the hardest to keep — is a vow to maintain better tax records. The deductions for higher education expenses and teacher’s out-of-pocket expenses have been reinstated for 2007. These and other deductions and credits could be lost if you don’t have a satisfactory recordkeeping system.

There are several ways to earn income on investments, but compounding may be your most reliable path to wealth. If you put $1,000 under your mattress, it will still be $1,000 a year later, but it probably will buy you a little less due to inflation. If you lend the money to a friend at 12% simple interest, at the end of the year you’ll receive $1,000 plus $120 of interest, since simple interest is computed only on the principal.

Compound interest is computed on both the principal and the interest earned. If you invest the $1,000 in a bond that earns 12% interest compounded monthly, in the first month it will earn 1% (1/12 of 12%), or $10. Now you have $1,010, which will earn 1% interest in the following month, only now the earnings will be $10.10. At the end of the third month, you’ll earn 1% interest on $1,020.10 ($1,000 plus $10 plus $10.10), and so on. By the end of the year, you’ll have $1,126.83, or $6.83 more than you would earn if you loaned out the money at the same rate but at simple interest.

See post #2 as we discuss "time" and "benefits".

There are several ways to earn income on investments, but compounding may be your most reliable path to wealth. Compound interest is computed on both the principal and the interest earned.

Time matters - An additional $6.83 doesn’t sound like much, but things change over time. After 10 years at 12% simple interest, your $1,000 would be worth $2,200, which is the original $1,000 plus 12%, or $120, multiplied by 10 years. At 12% interest compounded monthly for 10 years, your $1,000 would be worth $3,300, or half again as much as it would without monthly compounding. After 30 years, your $1,000 would be worth $35,950!

Rate of return is also important. Since after 10 years your $1,000 would be worth $3,300 at 12% interest compounded monthly, it would have earned $2,300. At 6%, after 10 years the $1,000 would be worth $1,819, earning only $819 rather than $2,300.

Another example...Now suppose the $1,000 came from your net wages. If you’re in a 25% income tax bracket, you earned $1,333 to get $1,000 after taxes were withheld. But what if you could have invested the entire $1,333 for 10 years? Then you will have an additional $1,100.

Compound benefits - The above examples suggest the following ways to use compounding to increase your earnings:

$- Start saving and investing now. Time is your most powerful multiplier.

$- Shop for the best rates of return, consistent with your risk tolerance.
Set up your investments to automatically reinvest interest and dividends earned.

$- Use tax-deferred programs like IRAs and 401(k) plans to the fullest possible extent.

If you’d like to learn more about compounding, just give us a call. We’ll be happy to review the numbers that apply to your business and investment decisions.

Questions...contact us.