May 24, 2017

Top Tax Errors to Avoid

By Beth Knight-Pinneo, Alliance Benefits

Alliance Benefits would like to make you aware of common tax errors to avoid. We are deeply grateful for our skilled and conscientious church treasurers who work so hard. Forms and reporting may seem mundane, but this vital “staying with the baggage” ministry helps to protect the church and pastor financially and legally. (see I Samuel 30:24)

Tax Error: Employee stops actively working but church does not notify Alliance Benefits.

  • The IRS does not permit the church to withhold 403(b) employee contributions from severance pay, or other kinds of continued pay, after the person stops actively working. Therefore, it’s important that the church report to Alliance Benefits the date when the employee actually stops working (not the date when the church will stop paying the pastor, if that is a later time). A timely notice is far easier than having to backtrack later and explain to your terminated employee that incorrectly contributed funds must be removed from his 403(b) account!
  • It’s also vital to report employment changes immediately to the Health Plan. Life insurance and Long Term Disability must end concurrent with active employment ending. Employees may be eligible to purchase conversion products – but only within 30 days of the date they stop actively working. Your church is welcome to provide Coverage Extension of health benefits if your employee is eligible. To avoid embarrassment and misunderstanding, please check with Alliance Benefits in each case before the church commits to the employee about what will be offered.

To notify Alliance Benefits of an employee leaving, please complete the Form to End Active Coverage if your pastor is on the Health Plan. Please send an e-mail to retirement@cmalliance.org if your pastor is on the 403(b) Plan. Please complete both steps if your pastor is on both plans.  Thank you!

 

Beth joined Alliance Benefits in January 2001. In her role as Benefits Consultant, she focuses on building relationships with churches and districts, and assisting with Health Plan and 403(b) questions. She is assigned to serve the churches and districts in the Western and Southern US, and the multi-cultural districts.


Posted in: 403(b) Plan Tools, Health Plan Tools