Which Should You File: Form 944 or Form 941?

Another announcement from the IRS regarding employment law:

The Form 944 instructions have information for employers who want to opt in or opt out of filing the annual Form 944 vs. the quarterly Form 941. 

The instructions also note that beginning with tax year 2012, employers who previously filed Form 944-SS or 944-PR will continue to file annually using Form 944.

Payroll Tax Issue in Limbo

The IRS issued the following statement on Friday (12/21) regarding payroll withholding tables:

“We are aware that employers have questions with respect to 2013 withholding. Since Congress is still considering changes to the tax law, we continue to closely monitor the situation. We intend to issue guidance by the end of the year on appropriate withholding for 2013.”

We will continue to monitor this and other issues that are before Congress over the next week.

Merry Christmas and Happy New Year!

Our Cameron 4 tree

Merry Christmas to all of our RCRI members, subscribers, service providers, board members, and all who support us in our work. Thank you for helping to make 2012 a very memorable and grace-filled year. We hope that all of you have a very Merry Christmas and a blessed and prosperous 2013.

We will continue to post on our blog, on Facebook and on Twitter as necessity dictates over the coming days while our offices are closed for the celebration of our Savior's birth.

As Tiny Tim would say, "God bless us, every one!"

Is HHS Mandate Forcing Religious to Leave the U.S.?

by Donna Miller, Associate Director for Civil Law

I have been asked about a news item  that has been the subject of a number of national media stories and blogosphere writings this week. It is about the Little Sisters of the Poor and their recent announcement that they may have to leave the United States all together as a result of the Affordable Care Act. Specifically, these women religious are concerned over the HHS Mandate that dictates what coverage has to be included in the healthcare policies that employers purchase for employees. Here are two links to various versions of the Little Sisters' story.

http://dailycaller.com/2012/12/19/obamacare-could-drive-little-sisters-of-the-poor-out-of-the-us/

http://www.nationalreview.com/corner/336114/obamacare-may-force-out-order-nuns-andrew-johnson#

The recent announcement is not the first time the Little Sisters of the Poor have spoken out against the HHS Mandate. In March of this year they voiced their concern that the mandate would have detrimental effects on their U.S. operations. In addition,  the Little Sisters of the Poor are, like many other women's religious institutes, feeling the effects of declining entrants into formation and an aging membership. Indeed, the Little Sisters announced in March of this year that they are closing their facility in Evansville, Indiana, which is where my own grandmother lived and was cared for until her death in 2003. (See video at http://tristatehomepage.com/fulltext-news?nxd_id=501192.)

So the question that has been asked is whether this HHS Mandate situation is unique to the Little Sisters of the Poor or could it affect others in a similar way? The answer to that question, as so often is the case, is that it depends. If your religious institute's members object to the same provisions that are causing the Little Sisters of the Poor to reflect on their U.S. mission, then yes, you also may have to make some tough choices.

By now you know that the HHS Mandate requires insurance policies to cover specified women's preventive services, including contraception, sterilization, and drugs known to cause fertilized eggs to abort. The Mandate dictates that, if an employer pays for health insurance coverage for its employees, the coverage must contain these provisions. It is these mandatory service provisions that have raised conscience objections in many Christian employers, both as corporation leadership and as individuals (sole proprietors) with employees. Whether the employer can stop providing coverage is a matter of how many employees there are. If you have under 50, then you are not required to provide coverage. If you have 50 or more employees, then you must either pay for their coverage or pay a fine per employee. There is a narrow "religious exemption," but it does not cover most religious institutes unless they are cloistered. And few of them would have 50 employees.

There are cases making their way through the courts all over the country. We wrote on this blog about a NY hearing a few weeks ago. And just yesterday it was reported that  D.C. federal court overruled the dismissal by a lower court of a case challenging the HHS Mandate and ordered HHS to report back every 30 days until it has finalized the provisions that it says will solve the dilemma that religious organizations claim are in violation of their Constitutionally protected religious freedom. To date the mandate stands, but the issue will certainly end up before the Supreme Court in the near future, possibly 2013.

A Year-End Checklist for Religious Institutes

As 2012 comes to a close, there are a few things that all religious institutes (and many other Catholic non-profits) should make sure they have tended to. Think of it as a year-end checklist. If you are on a fiscal cycle other than a calendar year, some of these may apply at your fiscal year-end.

1. Annual meeting held. Most corporations are required by state law and/or the corporations own bylaws to meet at least once annually. Check to make sure that you have fulfilled this requirement and that vacancies are filled, officers appointed, budgets approved, conflict of interest disclosures signed, and necessary actions ratified. 
2. Annual report filed. States of incorporation generally require registered corporations to file an annual report. Many offices of the Secretary of State or the Attorney General simply send a form (some by snail mail and others via email) to the registered agent/office and ask them to  note any changes to the previous year's report. Sometimes there is a fee that must be sent in. It is wise to check the Secretary of State's website before year end and see if your organization(s) is(are) reported to be in good standing. Failure to file the annual report can result in lose of good status and even (automatic) dissolution. Note that this from method that some states use does not replace the requirement to hold an annual meeting or to keep minutes of the proceedings of the meeting(s). Also, it would be wise to check before year-end to see if any of the states in which then religious institute is "doing business" requires a corporate filing or registration. Usually the Secretary of State's website will provide this information.
3. Tax filing deadlines met. If you have unrelated business income, check to make sure that you have all the information necessary to file Form 990-T. If you administer patrimony accounts, Form 1099-MISC may be required. Prepare for filing information returns: W-2s for employees and for members' FMV-FICA wages, and Form 1099 for contractors and service providers. (See yesterday's post for changes n these laws.) Our Taxes notebook has been updated to cover much of this information. If you have ministries that are required to file Form 990, make sure all information is available for the preparer. If you apply for inclusion in the Combined Federal Campaign, the deadline is approaching in January. 
4. Charitable solicitation registrations up-to-date. Many jurisdictions require organizations to register if they solicit donations in that state and some require annual reports. We published an article earlier this year detailing which states require registration and reporting, as well as information on how to access their websites to see if your religious institute is exempt. Ignorance of the law is no excuse, so if you have not familiarized yourself with the requirements, now is a good time to review that article (RCRI Bulletin, Spring Edition, April 2012).
5. Gifts administered. If your religious institute has received any restricted donations or grants that have agreements to ensure terms are being met, check to make sure that these are being honored.

6. Insurance policies reviewed. It is wise to check general liability, automobile, D & O, health insurance and any other policies to make sure coverage limits are adequate and that they continue to cover all activities in which members are engaged or in which they are planning to become engaged in the coming year.
7. Private Foundations cared for. If you are involved with any true foundations (not just those with the "foundation" in the name, but which are truly set up as foundations), make sure the administrators have spent the funds they are required to spend to avoid excise tax penalties. 
8. Record-keeping updated. Check your document retention policy to make sure you have complied with any provisions that require purging of records or other actions. Here are a couple of resources  to assist you with formulating record-keeping policies and procedures.

   http://www.trcri.org/members/documents/LB86_Audit.pdf (Step 6: Review of Document and Record Retention Procedures)
    http://www.trcri.org/members/taxes_chapter3.php#B (Taxes notebook ch. 3, section B) 

   http://www.usccb.org/about/financial-reporting/upload/Diocesan-Financial-Issues-Manual.pdf (USCCB Financial Guidelines - Section XVI – Record Retention) 

9. Donor Acknowledgements prepared. Very importantly, make sure that you have sent out appropriate acknowledgements to your donors for their contributions so that they can have the documentation they need to take a charitable donation deduction.
10. Member personal files reviewed. Check member files and note those who will need to apply for Social Security, Medicare, SSI, Medicaid, or any other assistance programs in the coming year. Hold discussions with those who may have patrimony and are interested in giving it away before they become eligible for public benefits. Note deadlines for enrolling and disenrolling in Medicare Advantage in the coming year. 



11. 11. RCRI Membership renewed. This is a shameless plug to remind you that the RCRI website password will change on January 1, 2013. Renew your subscription by January 20, 2013, to get the reduced rate. The fee will go up after that date.

Lastly, review your own business office practices and procedures and add reminders to this list to personalize it for your religious institute--for use now and in the future!

Affordable Care Act Provisions to Review before Year-End

The IRS sent out a notice that it has summarized a number of provisions from the Affordable Care Act on its website. Here are some of the more prominent ones that might apply to religious institutes. These should be reviewed before year-end.

↓This first one could affect our members who have sponsored ministries with highly-paid executives or professionals. The employer is responsible for withholding the additional Medicare tax for employees meeting the $200,000 compensation threshold. The tax applies to fringe benefits as well as cash. It also applies to tips.There is an "Employer and Payroll Service Provider FAQs" in the questions and answers section linked to in the following paragraph.

Additional Medicare Tax (From the IRS Website)

A new Additional Medicare Tax goes into effect starting in 2013. The 0.9 percent Additional Medicare Tax applies to an individual’s wages, Railroad Retirement Tax Act compensation, and self-employment income that exceeds a threshold amount based on the individual’s filing status. The threshold amounts are $250,000 for married taxpayers who file jointly, $125,000 for married taxpayers who file separately, and $200,000 for all other taxpayers. An employer is responsible for withholding the Additional Medicare Tax from wages or compensation it pays to an employee in excess of $200,000 in a calendar year. The IRS and the Treasury Department have issued proposed regulations on the Additional Medicare Tax. Comments may be submitted electronically, by mail or hand delivered to the IRS. For additional information on the Additional Medicare Tax, see our questions and answers.

↓In 2014 an employer with 50 or more employees will be required to pay for health insurance for all employees. That coverage will be required to provide "minimum value." The comment period mentioned below on the means of determining "minimum value" closed on June 11, 2012.

Minimum Value

On April 26, 2012, the Department of the Treasury and IRS issued Notice 2012-31, which provides information and requested public comment on an approach to determining whether an eligible employer-sponsored health plan provides minimum value. Starting in 2014, whether such a plan provides minimum value will be relevant to eligibility for the premium tax credit and application of the employer shared responsibility payment. 

↓The IRS invited comments earlier this year on the means by which employers will be required to report on certain information, namely the type and value of the health insurance coverage that they provide. The comment period for both of the notices cited below ended on June 11, 2012

Information Reporting on Health Insurance Coverage

On April 26, 2012, the Department of the Treasury and IRS issued Notices 2012-32 and 2012-33, which invited comments to help inform the development of guidance on annual information reporting related to health insurance coverage. The information reporting is to be provided by health insurance issuers, certain employers that sponsor self-insured plans, government agencies and certain other parties that provide health insurance coverage.

↓The IRS reminds small employers that they may be eligible for the Small Business Health Care Tax Credit (SBHCTC) if they have below a certain number of employees and the average salary is below a threshold amount. Details are available on the IRS website. A number of RCRI members have taken advantage of this refundable credit. 

Small Business Health Care Tax Credit

This new credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees. Learn more by browsing our page on the Small Business Health Care Tax Credit for Small Employers and our news release.

↓Employers who provide health insurance to employees when the employee wants to include a child up to age 27 may want to review the next provision. Employers or the insurance provider can increase the premium, but the employer needs to make sure the extra cost is tax-free to the employee.   

Health Coverage for Older Children

Health coverage for an employee's children under 27 years of age is now generally tax-free to the employee. This expanded health care tax benefit applies to various work place and retiree health plans. These changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit. This also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return. Learn more by reading our news release or this notice.

↓Employers will soon have to report on their employees' Forms W-2 the value of health insurance that they pay for their employees. However, the transitional relief that was granted to employers with fewer than 250 employees continues to be in place. That means that if a religious institute employees fewer than 250 people, it does NOT have to report in Box 12 the cost of insurance coverage that it pays for employees. This continues through 2012 (meaning it applies to the forms that the employer files in January 2013). Remember that the members of a religious institute are NOT employees, and therefore they should not be counted when determining the total number of employees. The total number of Forms W-2 might exceed 250 when you combine the employees and the members (for reporting FICA wages). But only the number of actual employees should be considered when determining if the reporting requirement applies for 2012.

Reporting Employer Provided Health Coverage in Form W-2

The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan on an employee’s Form W-2, Wage and Tax Statement, in Box 12, using Code DD. Many employers are eligible for transition relief for tax-year 2012 and beyond, until the IRS issues final guidance for this reporting requirement.

The amount reported does not affect tax liability, as the value of the employer excludible contribution to health coverage continues to be excludible from an employee's income, and it is not taxable. This reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers. More information about the reporting can be found on Form W-2 Reporting of Employer-Sponsored Health Coverage.


↓Conclusion
There are a number of other provisions included in the summary of ACA provisions. Please visit the IRS website (http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions) to see if any others apply to your religious institute. See also "Retirement News for Employers" at http://www.irs.gov/Retirement-Plans/Retirement-News-for-Employers. 

Legacy Planning Project: DVDs for Sale

In case any of our members are not aware, we have been selling our two-DVD set legacy planning project since late October. We held a pre-conference workshop on the project on October 16, 2012, and the feedback was very positive.

In conjunction with the Fall edition of the RCRI Bulletin, the "Planning for the Future" DVD set gives a comprehensive overview and concrete examples of how some religious institutes are taking steps to ensure that their members and ministries are provide for, for decades to come in some instances. Each disk includes  PDF documents of an Overview and a Study Guide.

Our members can visit our web page on the Legacy Planning Project at http://www.trcri.org/members/legacy.php to order the DVDs. Supplies are limited, so we encourage you to check the web page.