17 Feb How Do We Determine What’s A Church Controlled Organization?
If you are trying to file taxes for a religious institution- or if your business is affiliated with a religious institution- you may be wondering if you qualify for exceptions. Here is what determines whether your business is a church controlled organization and how this can affect you at tax season:
Who Qualifies: A qualified church controlled organization is one that is controlled by a church, or association of churches, and offers goods, services, or facilities for sale to the public for less money than it took the organization to create these services. The organization must also receive 25 percent support from either the government or non-related trade businesses. You may check if you qualify when you apply for an EIN online.
Benefits: If you are part of a church controlled organization, you get a bit of an extra tax break by electing to file Form 8274, which grants your organization exception from FICA tax. Under this exception, the organization will not be responsible for FICA taxes, but employees may be responsible for a self-employment tax.
Requirements: If you feel that your organization is church controlled and should be except from FICA taxes, you would still need to apply for a federal tax ID. In the case of your organization, this will be an EIN number. You can apply for an EIN online, by mail, or by fax. If you already have your EIN, you will need to file Form 8274 for official exemption. Keep in mind that though you may be except, you will still need to file a Form W-2 Wage and Tax Statement Form. Employees of church controlled organizations will need to file a Schedule SE or Form 1040.
If you want to file for tax exemption as a church controlled organization, you may need to provide evidence to the IRS. For a complete list of what must be included, you can visit the IRS website.