Clergy Finance Tips
Table of Contents:
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RECORDS--HOW LONG TO KEEP THEM
A perennial question is how long should we keep records. Keep a copy of your tax
returns forever! Back up material, or support material for tax returns
should be kept for at least 3 years, but no more than seven is necessary. Records
regarding Social Security income should be kept until at least you have applied for
Keep records of stock purchases until you sell them. Keep records on your home for at
least one year after it is sold. Keep records of pension and IRA contributions (a yearly
summary will do), until the accounts are depleted. If you have some deductible
contributions and some non-deductible contributions you will need to prove their tax basis
whenever you make a withdrawal.
As a rule: go through your records and receipts at least every five years and discard
what is not needed. Too many of us clergy are pack rats with boxes of books and materials
we will never use!
UP FROM THE DEBTS
When we get deep in consumer debt we usually carry high credit card balances. These
balances can be traced to a series of "emergencies"-such as car repairs,
illness, job transfers, etc.
Those who work with high debt families say we must change our thinking and our actions.
1. An "emergency" is just an "unplanned expenditure". They just
happen irregularly, but all families have them. So let's include them in our plans.
2. Start an emergency fund of $1,000. After the credit card debt is under control raise
it to 3 months living expense. These funds are not to be investments but kept close at
hand-like in a money market. When you draw from them for an emergency they are to be
replenished promptly so there is no need for credit card debt.
3. Cut up all but one credit card! You may need it to rent a car. Charge nothing that
you can't cover from your checkbook balance in the same month.
STANDARD MILEAGE RATE
Clergy are reminded that they may be reimbursed at the greater of
standard mileage rate or actual expense, so do the math. If you can document
that your actual costs per mile exceed the standard mileage rate, your
congregation can reimburse you at the actual expense rate.
More and more of us are relying on some form of electronic media for storage of
information. For many of us this is a great time saver as well as an opportunity to
minimize the space that we need to devote to the storage of hard copies. In our household
we have tax records, financial records (including the checkbook), medical records, calen
dars and address books all on the computer. Without sounding too much like a Y2K alarmist,
there is a legitimate need to ask the "what if' questions.
What if the computer mallunctions and we lose data? The obvious need is for everyone to
have a back-up copy of their data files. Regardless of the program you use, there is a
need to have a regular routine of backing up to a floppy disk, zip or tape drive. Not only
does this safeguard current data, but data that has a long-term need (taxes for instance)
can be stored very effectively this way as well. However, though some are very disciplined
about this, the horror is that many have never tried to restore data from their back-up
copies and really do knot know if they will work If you do not have a regular back-up
routine, start one today. If you do have one, test your back-up copies regularly to be
sure you can call them up on restore. And, if you are storing data for long term, include
a copy of the program on which the data was created. Though it may be possible, it is
sometimes quite difficult to retrieve data for which you no longer have a program.
What if there is a fire or other disaster in your home? For this reason, it is a good
idea to have a second back-up copy of electronic records in an off-site location. This may
be at work or in a safe deposit box or with a family member, but it is important that all
your back-up data is not located with the original material. It may be appropriate to be
sure that for some material (check registers, tax records, etc.) that you maintain a hard
copy of the material as well. If storage of hard copies becomes a problem, you may
consider using a compressed font or reducing the original on a copier so that you can
decrease the volume of hard copy material.
What if something happens to you and someone else needs access to your records? It is
relatively easy to find a check book in someone's desk drawer, but it is another thing to
find records on someone's PC. You may want to consider keeping some detailed instructions
with your will or in the safe deposit box that clearly describe how to access your records
(including passwords) in the event you are not around to do this.
Regardless of how much data in your household is electronic, some back-up plan is
UNREIMBURSED BUSINESS EXPENSES
One way to reduce clergy taxes is missed by both the person doing their
own tax return and by many professionals.
All clergy have business related expenses that are not reimbursed by the
church or church employer. Some items we figure are too small to count;
others we may have forgotten to include in the reimbursement; or maybe you
used up the amount the church would reimburse early in October.
All those business related expenses that are not reimbursed can be listed
as a miscellaneous expense on Schedule A. Can't use Schedule A, or maybe you
do not have enough deductions for it to count as a miscellaneous deduction?
In either case, whether you can deduct those unreimbursed expenses on
Schedule A or not, you can deduct them from your self-employment tax
computation! At 15.3% a $1,000 deduction can save you $153 in taxes.
It adds up!
FASCINATING FINANCIAL FACTS
According to the Journal of Periodontology, people who don't cope well with
financial stress are twice as likely to develop periodontal disease as those who have
their financial act together. A recent study published in the journal says that financial
stress apparently leads to poor oral hygiene, teeth grinding and reduced saliva flow,
resulting in "attachment loss" and "alveolar bone loss" and bad gums.
It's not a matter of how much money one has, but rather how one copes with financial
Home ownership may not be such a great investment after all. According to Forbes magazine,
the long-term real (inflation-adjusted) annual growth rate of home values in the United
States averages 0.3%. Over the past three years, however, prices have risen 2% faster than
inflation--unusually high growth rates, according to Forbes. While owning a home is
still a fine goal, it is not the outstanding inflation-fighting investment many believe it
Moonlighting is more popular than ever. According to the Bureau of Labor Statistics,
about 4.5 million Americans held both a fill- time and a part-time job during October
1999. (Wall street Journal 11/9/99).
October is not the worst month for stock market returns. In spite of the reputation
October enjoys as the scariest month for invest ing (Black Monday of 1987 not
withstanding), long-term statistics show that September actually is the month most likely
to result in negative stock market returns and the largest negative returns. We are
reminded of Mark Twain's pithy remark, "October. This is one of the peculiarly
dangerous months to speculate the stocks in. The others are July, January, September,
April, November, May, March, June, December, August and February." (The Tragedy
of Pudd'nhead Wilson)