A.  WHAT HAPPENS WHEN WE FAIL TO PLAN FOR OUR LOVED ONES:

                 

1. A daughter decided not to pay $375.00 to set up a Power of Attorney for her elderly mother so she could manage her mother’s affairs if needed.  Two weeks later, her mother became extremely ill and had a stroke.  The daughter had to eventually pay $4,500.00 (in attorney fees and court costs) to become Guardian and manage her mother’s affairs. 

 

2. A mother decided to pay $325.00 to have a Will drafted, instead of paying $2,000.00 for her attorney to draft a Trust.  The mother’s estate consisted of the following:

House-($100,000), Automobile-($15,000), Pension-($50,000), Insurance Policy-($100,000).  Upon her death and throughout the probate process, the estate paid Costs and Attorney Fees of approximately $22,000 by only doing a will.  If the mother had paid the $2000.00 for a Trust, the estate would have had no probate costs and attorney fees of $0 and saved $20,000.

 

We would like to discuss your current plans for you and your loved ones and execute your wishes

 

B. THE EMPLOYEE/INDEPENDENT CONTRACTOR PITFALL FOR MANY CHURCHES

 

The issue as to whether an individual (such as a musician, janitor, minister of music, secretary, etc.) is an employee or independent has been a pitfall for many churches.  If an incorrect classification is granted at the beginning, then there can be (1) unanticipated tax and (2) legal consequences.

The general common law rule is that if an employer has “the right to control what and how one does his or her job” then that is a significant factor in concluding that the individual may be an employee.  Additional aspects to consider in determining if one is an employee are whether the individual is provided with (a) employee benefits,         (b) vacation pay, (c) an office, (d) equipment & supplies and (e) a work schedule set by the church. 

An individual is an independent contactor if he or she is “accountable only as to a result and is not controlled by the person who is seeking the services.”  Independent contractors usually have their own (a) office, (b) supplies, material & equipment and (c) set their own work schedule. 

It is critical that an employer correctly from the onset define an employee versus independent contractor relationship. You must withhold Income, Social Security and Medicare taxes and pay Unemployment Tax on wages paid to an employee. If taxes are not withheld then the church leaders, including but not limited to the pastor, deacons, board members, trustees and treasurer) may be liable for all unpaid taxes, interest and penalties.  However, you do not generally have to withhold or pay any type of taxes on behalf of an independent contractor. 

The more factors that would subject an individual to being controlled will usually show an individual to be an employee. The less control involved should lead to a determination that the individual may be an independent contractor.

The key is to examine the entire relationship and factors to avoid a pitfall!