Parsonage Allowances

The income tax exemption for parsonage allowances is currently in question. A federal court says the exclusion is unconstitutional because the exemption for clergy housing allowances is similar to support of religion by the federal government, since only members of the clergy get the break (Freedom from Religion FDN., D.C., Wis.).

The government will appeal. But the exemption will remain in place while the case is appealed. Thus, the exclusion is available on 2013 returns.

One other tax break for members of the clergy is safe: The fair rental value of a residence furnished as part of their compensation package remains nontaxable.

                                                                                    
Tax Identity Theft
 

Tax-related identity theft continues to be a major issue for the IRS. It is estimated that in 2011 alone, fraudsters filing fictitious returns got nearly $3.6 billion in unauthorized refunds…down 30% from 2010. The drop shows that IRS’ effort to detect identity theft have improved, although there is still a long way to go. As a result, it still must devote a big chunk of its dwindling resources to snuff out identity theft.