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FAQ’s About Tax Filing Season & Health Insurance For Church Staff

Jeff CranfordJeff Cranford, our Compensation Planning Specialist and Guidestone State Representative, has prepared answers to four common questions he receives from BGAV churches about health insurance and taxes.

Do you have more questions beyond these? The BGAV Tax and Compensation Seminars will cover these and other tax issues in greater detail. All church staff and especially all lay leaders who are involved in the area of church staff compensation and taxes are encouraged to attend.

Q: How should the church report payments or reimbursements of non-employer sponsored individual health insurance for church staff?

A: As of July 1, 2015 church employers must stop paying for or reimbursing individual health insurance unless they have just one full-time employee. After that date, ACA penalties will be incurred if health care reimbursement arrangements are continued.

  • If church employers have only one full-time employee, they can continue paying or reimbursing health care premiums on a pre-tax basis using an employer payment plan.
  • Church employers who have more than one full-time employee and are not in a bona fide group plan but want to continue to help pay insurance costs need to change the way this is done after July 1, 2015, to avoid penalties. The way to do this is to increase salaries to cover health care premiums without stipulating that the salary increase be used only for that purpose.
  • Church pre-tax payments or reimbursements for health insurance premiums made between January 1, 2015 and June 30, 2015 were granted relief from the ACA penalty and did not have to be reported as taxable income on the 2015 W-2. An amended W-2 may be provided to those employees for whom the amounts were reported as taxable income.

Q: What health insurance coverage provided by the church can be paid by the church as a nontaxed benefit?

A: Only employer-sponsored group coverage can be paid by the church as employer as a nontaxed benefit. Qualifying group coverage can be obtained in several ways.

  • The church can use the Small Healthcare Options Program of the federal Marketplace to provide insurance for eligible employees. Payments by the church through the SHOP are nontaxed for employer defined coverage.
  • The church can go to a health insurance company directly to get group coverage.
  • Finally, the church can use a church group health insurance plan like that of GuideStone Financial Resources to provide health insurance as a nontaxed benefit.

Q: How does healthcare reform affect the individual’s 2015 tax return filing?

A: The Affordable Care Act includes the individual shared responsibility provision and coverage exemptions from that provision. The individual shared responsibility provision requires every U.S. taxpayer and their dependent(s) to:

  • Have qualifying health care coverage, also called minimum essential coverage, or
  • Qualify for an exemption from the responsibility to have minimum essential coverage, or
  • Make an individual shared responsibility payment when filing their federal income tax return.

Taxpayers will report minimum essential coverage, report exemptions, or make any individual shared responsibility payment when filing their federal income tax return.

  • Taxpayers, whose entire tax household had minimum essential coverage for each month of their tax year, will indicate this on their federal income tax return by checking the box on their Form 1040, 1040A, or 1040EZ. No further action is required.
  • Taxpayers who did not maintain minimum essential coverage for each month of their tax year may claim a coverage exemption. Form 8965, Health Coverage Exemptions must be used to claim exemptions or report exemptions granted by the Marketplace.
  • Taxpayers who did not maintain minimum essential coverage for each month of their tax year, or qualify for an exemption from coverage will make a shared responsibility payment of the greater of $325 or 2 percent of household income over a filing threshold for 2015 ($695 or 2.5 percent of income in 2016).
    • Taxpayers should use the worksheets located in the instructions to Form 8965 to calculate the individual shared responsibility payment amount due.
    • The shared responsibility payment amount due is reported on Form 1040, line 61 in the Other Taxes section, and on the corresponding lines on Form 1040A, and 1040EZ.
  • If a taxpayer or a member of the taxpayer’s family enrolled in a qualified health plan through the Marketplace, the taxpayer must reconcile any advance credit payments with their actual premium tax credit on Form 8962, Premium Tax Credit. If excess advance credit payments were made on a taxpayer’s behalf, the taxpayer will enter the excess advance credit payments on their tax return and repay the excess when they file their federal income tax return.
    • Taxpayers who purchased qualified health plans from the Healthcare Marketplace will receive Form 1095-A, Statement of Insurance from the Marketplace, which will contain the information necessary to complete Form 8962, Premium Tax Credit.
    • The net premium tax credit is claimed in the Payments section of the federal income tax return. Any excess advance credit payments are entered in the Tax and Credits section of the federal income tax return.

Q: What are the church’s responsibilities for reporting health insurance it provides for employees?

A: Churches with fewer than 50 full-time employees, and an insured employer sponsored group health plan, generally have no reporting obligation. They are not required to file Forms 1094-C and 1095-C if they have fewer than 50 employees; and, their group plan insurer files the Forms 1094-B and 1095-B.

REMEMBER: if your employees are covered under a GuideStone health plan, GuideStone will prepare and distribute these forms.

Details about these forms and how they fit into your reporting requirements are outlined in GuideStone’s Health Plan Information Reporting fact sheet.

Other questions related to changes in taxes include the following:

Q: What are the IRS standard mileage rates for 2015?

A: Beginning on Jan. 1, 2016, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 54 cents per mile for business miles driven, down from 57.5 cents for 2015
  • 19 cents per mile driven for medical or moving purposes, down from 23 cents for 2015
  • 14 cents per mile driven in service of charitable organizations

Detailed information on minister’s tax return filing, tax highlights for 2016, and church filing requirements is available in GuideStone’s Ministers’ Tax Guide for 2015 Returns.

Upcoming Tax & Compensation Planning Seminars

Contact our office for more information on upcoming events.

Seminars run from 9 a.m. until Noon. All aspects of compensation will be covered to help minimize your risk and potential for substantial penalties resulting from non-compliance with State and Federal Tax Laws.

Register Online Now!

Contact our team today to register and secure post-seminar appointments:

Jeff Cranford : [staff-title] Jeff Cranford
Minister in Residence for Church Finances
Angela House : [staff-title] Angela House
Congregational Field Staff Administrative Assistant
800.255.2428 or 804.915.5000, ext. 5293