1 . Cover Letter

2016 TAX INFORMATION PACKET TABLE OF CONTENTS

2. Priests' Compensation and Accountable Expense Plan a. Letter on Accountable Expenses b. Priests' Compensation and Accountable Expense Plan:

Instructions for Form W-2 c. Accountable Expense Plan Description d. Accountable Expense Plan Reimbursement Fonn

3. Forms W-2 & W3 Paychex Verification Instructions

4. Additional Information on Reporting Employer-Sponsored Health Coverage on Form W-2

5. Example Form W-2

6. Example Form W-3

7. Form 1099-MISC Instructions a. Instructions on completing the 1099-MISC b. Determining Independent Contractor vs. Employee

8. Example Form 1099-MISC

9. Form 1096 Instructions

10. Example Form 1096

11 . Information and Instruction on the Illinois Department of Revenue Education Expense Credit.

12. Blank Forms for Parish use: 1099-MISC, 1096 Can be requested.from Dara Bose or Chrissy Maher by calling the Diocese at (217) 698-8500.

Diocese of Springfield in Illinois Catholic Pastoral Center• 1615 West Washington • Springfield, Illinois 62702-4757

www.d io.org (217) 698-8500 Fax: (217) 698-0802

Office for Finances

November 29, 2016

Dear Fathers, Sisters, and Administrators:

We are providing the enclosed information as an aid to help you complete year-end tax reporting for all priests, employees and independent contractors. While there are still a few year-end items the parish must process for the IRS and for the Diocese, most reporting is completed by Paychex.

The enclosed materials will assist you in completing tax Forms 1099 and 1096 for any independent contractors you may have. Additionally, the IRS website contains an abundance of information (https://www.irs.gov(forms-pubs). Especially useful is the Employer's Tax Guide, Publication 15, Circular E (https://www.irs.gov/pub/irs­pdf/pl 5.pdf).

Finally, for the Affordable Care Act and for pension update purposes, submit an exact copy of each employee's Form W2 to Laurie Weakley in the Insurance Office at lweakley@dio.org by March 1, 2017.

Please contact Dara Bose, Chrissy Maher, or me if you have any questions.

Sincerely yours in Christ,

John J. Maxwell, Director Department for Financial Services

Diocese of Springfield in Illinois Catholic Pas loral Cenler • 1615 West Washington • Springfield, Illinois 62702-4757

www.dio.org (217) 698-8500 Fax: (217) 698-0802

Office for Finances

November 29, 2016

Dear Fathers,

As we near the end of another year, I have compiled information about your expense allowance that will help prepare tax documents for both you and your parish. The expense allowance is part of the priests' compensation and requires special handling for tax purposes.

There are three enclosures concerning your expense allowance: • Priests' Compensation and Accountable Expense Plan: Directions for Processing

on Form W-2 • Accountable Expense Plan Description • Accountable Expense Plan Reimbursement Form, which should be used monthly

to record appropriate expenditures.

Please note that any of the expense allowance not used for substantial business related expenses must be reported to the IRS as priestly income (together with base compensation) on Form W-2.

Should a priest choose not to take part in the Accountable Expense Plan, then his entire base compensation and his entire expense allowance must be reported on Form W-2. He would then need to present any deductions for business-related expenses on the appropriate schedule when filing his tax returns.

If you have any questions, please contact Dara Bose, Chrissy Maher, or me.

With best wishes for the Christmas Season, I remain

Sincerely yours in Christ,

John J. Maxwell, Director Department for Financial Services

PRIESTS' COMPENSATION AND ACCOUNTABLE EXPENSE PLAN: INSTRUCTIONS FOR FORM W-2

The Diocese of Springfield in Illinois recommends reporting priests' full salaries on Form W-2. Since your parish is on Paychex, the priest should be entered as an employee in the payroll system, which will automatically generate a W-2 for each employee. However, some special handling is required. Both the priest's base salary and expense allowance must be considered when determining his total compensation.

Base Salary The compensation guidelines for priests were promulgated as noted below, plus $10.00 per month for each year ordained through 30 years of ordination. The annual compensation for a priest with 30 years of service would be as follows. The amount of $17,178.00 is reported on Line 1 of the W-2 Wage and Tax Statement Form.

Jan - Jun 2016 Salary Jul - Dec 2016 Salary Years of Ordination Total Base Salary

Expense Allowance

$1 ,145.00 X 6 = $6,870.00 $1,1 77.00 X 6 = $7,062.00

30 X $10.00 X 12 = $3,600.00 $17,532.00

In addition to base compensation, a monthly expense allowance is provided, as noted below. There are three options of how to account for these funds for tax purposes, and any monies not substantiated must be moved to taxable income. Note that two of the options require contacting your Paychex Representative to adjust payroll for the W-2.

Jan - Jun 2016 Expense Allowance Jul -Dec 2016 Expense Allowance

$1 ,171.00 X 6 = $7,026.00 $1,203 .00 X 6 = $7,218.00

For each additional parish served, to be added to this is a rate of: $300.00 per month for Pastors/Administrators $150.00 per month for Parochial Vicars

Option One - The priest keeps the expense allowance, provides the necessary substantiation on the Accountable Expense Reimbursement Form, and returns any excess unaccounted funds. Under this option, there are no requirements to report these funds on Form W-2.

Option Two - The priest keeps the expense allowance, provides the necessary substantiation as in option one, but also keeps the excess unaccounted funds. Under this option, the excess unaccounted funds are added to the priest's compensation on Line 1 of Form W-2. Contact your Paychex Representative for assistance in making the unsubstantiated expense allowance into taxable income on Form W-2.

Option Three - The priest is given the expense allowance, but does not provide the necessary substantiation and keeps the funds. Under this option, the entire expense allowance is reported as taxable income and added to Line 1 of the Form W-2. Contact your Paychex Representative for assistance in making the unsubstantiated expense allowance into taxable income on Form W-2. Additionally, if the priest is never going to substantiate expenses, the allowance should be set-up as taxable so that it does not need to be moved next year.

Accountable Expense Reimbursement Form If the priest has not yet completed the documentation for his expense allowance plan, he is encouraged to do so now. A copy of the Accountable Expense Reimbursement Form should be on file at the parish office. This plan document should be completed each month.

In order for an item to be classified as a tax-free business expense reimbursement, it must meet the following requirements.* Please see the additional enclosures for more information.

• There must be a ministry connection; • There must be proper substantiation; • Excess amounts must be returned to the parish; and • It must occur within a reasonable period oftime.

*Source - Income Taxes for Priests Only, Scott A. Hoselton, CPA, CDFM, CGMA (Chapter II, page 56)

ACCOUNTABLE EXPENSE PLAN DESCRIPTION

An employee's or independent contractor's expenses are excluded from gross income only if they are reimbursed by the payor under an accountable plan.

An accountable plan is a reimbursement (if given after-the-fact) or expense allowance (if given in advance) under which the priest must substantiate the covered expense to the parish/institution and return any excess amounts received. The four criteria of an accountable plan are:

1. Business connection of expenses 2. Substantiation 3. Return of amounts exceeding expenses 4. The accountability must occur within a reasonable period of time

If the amount paid under an accountable plan is equal to the business-related expenses incurred by the priest and substantiated to the parish/institution, the latter would not report the reimbursed amount on the priest's W-2. The priest need not reflect either his expenses or the reimbursement on his tax return. If the reimbursement exceeds expenses and is not returned, the excess is reportable on Form W-2.

To qualify as an accountable plan, the priest must submit, within a period of two months (e.g., by the end of March for the January expense allowance), information to his parish/institution to substantiate the amount, time, place and business purpose of his expenses. This means the priest must make an "adequate accounting" in a timely fashion to his parish/institution for such expenses.

Adequate accounting means the submission to the parish/institution of any receipts or paid bills, and any account book ( diary, log, statement of expense, trip sheet, or similar record maintained by the priest and recorded at or near the time of the expense) for business-related travel.

If the priest intends to remit any portion of the cash advance not used for business-related purposes, he must do so within three months of the end of the month for which the cash advance was made.

We fully recommend that each priest using the accountable expense plan make a report on substantiated business-related expenditures each month.

Examples of business-related expenses include:

• auto expense (to be reimbursed at the IRS standard mileage rate, or actual costs)

• insurance for professional materials (i.e., other than car insurance or health insurance)

• office equipment and supplies • business travel and lodging • business meals and entertainment • vestments and clerical attire • altar appointments ( e.g., chalices) • professional dues • meetings, conventions, workshops, seminars • books and periodicals

Priests are asked to consult their personal tax advisors for more specifics.

ACCOUNTABLE EXPENSE PLAN: REIMBURSEMENT FORM

Name - ------------------ -------- - ----

Parish City -------------- - ----------------

For the Month Ending _____________ , 20 __ _

SUBSTANTIATED BUSINESS-RELATED ITEM

Auto Expense*

Insurance**

Office Equipment & Supplies

Travel & Lodging

Meals & Entertainment

Vestments & Clerical Attire

Altar Appointments

Professional Dues

Meetings, Conventions, Workshops

Books & Periodicals

Other

NOTES:

TOTAL MONTHLY EXPENSES

MONTHLY EXPENSE ALLOCATION

DIFFERENCES***

EXPENSES

All expenses are to be business-related and accompanied by supporting documentation.

* Auto expenses are reimbursed at the IRS standard mileage rate, or actual costs for business-related purposes. **Insurance is for business-related professional materials; it excludes car insurance (included in the reimbursable auto expenses) and personal health insurance. *** Any excess of the allocation is either to be returned to the parish/institution or reported as income on Form W-2.

FORMS W-2 & W-3: PAYCHEX VERIFICATION INSTRUCTIONS

Although Paychex completes and submits Form W-2 and Form W-3, the forms are generated with data entered by the parish. It is imperative that data is correct, as the government may levy fines for incorrect reporting. You must therefore verify employees ' information. Additionally, new Affordable Care Act tax statues affect employees' Form W-2s and employers' Form W-3.

Please verify the following areas in Paychex to ensure that your reports produce correct data. The areas to verify include Employee Basics, Hours, Health Insurance, and Pension.

Employee Basics Each parish must confirm that these basic items are accurately entered in Paychex.

• Verify Name • Verify Social Security Number • Verify Gender • Verify Date of Birth • Verify Date of Hire • Complete Termination Date if applicable • Verify Status as Exempt or Non-Exempt from overtime earnings

Hours Per Affordable Care Act statues, 2016 hours must be entered for every employee, including full-time salary, part-time salary, and hourly employees. If this has not been entered it must be entered for the entire year by the last payroll of the year.

Priest Hours All active Diocesan priests, including those over age 65, must have hours entered for the whole year. A full-time priest who has worked the entire year will have 1,560 hours.

Health Insurance For each employee, the total cost of employer-sponsored health coverage must be reported on Form W-2, in Box 12 with Code DD. For Paychex to correctly generate W-2s, the total cost of health coverage must be accurate.

Verify each employee's total cost of health coverage: • Go to the Employee Entry screen and select each employee's Recurring Eamings­

Deductions. You may also run reports (such as Labor Distribution Report) to verify that year-end totals are correct.

• Verify ER Cost of Health Coverage (E-3H) o Verify the Earn Code Set E-3H (Earning, Code 3H, Cost of Health

Coverage) has a monetary amount equal to the total cost of health coverage. This is a total of both employee and employer portions.

o If this has not been entered it must be entered for the entire year by the last payroll of the year.

• Note that the total cost of health coverage varies depending on: o Employee's coverage level o Time employee was enrolled in the plan o Fiscal year change in health rates

• Example: The 2016 total cost of employer-sponsored health coverage for an employee who had coverage the entire year at the single rate is $9,936.00. This is the figure that will appear in Box 12, Code DD.

Jan - Dec 2016 = $828.00/month x 12 months = $9,936.00 Employer Pays $750.00/month Employee Pays$ 78.00/month

2016 Total Cost of Health Insurance= $9,936.00

Priest Health Insurance • Active Diocesan priests, including those over age 65, must have the cost of health

insurance entered in Code E-3H. • Active Diocesan priests are treated the same as any other employee, except they

do not have an employee cost of health insurance. • A full-time, active priest who has worked the entire year will have a 2016 Total

Cost of Health Insurance of $9,936.00. • If a priest is shared and paid by multiple parishes, the parishes must decide how

Code E-3H will be split among the parishes. • If this has not been entered it must be entered for the entire year by the last

payroll of the year.

Additional information regarding the reporting of the cost of health coverage is included in the next section of this packet.

Pension The Diocese of Springfield in Illinois has an IRS approved pension plan, so qualifying employees must have an "X" in Box 13 (Retirement Plan) on Form W-2. Qualifying employees include all full-time employees. It also includes any part-time employees working at least 900 hours in a fiscal year.

To verify an employee's pension status in Paychex: • Go to "Pension Code" on the Employee Entry screen.

o It should be marked "Y" for yes, the employee qualifies for pension. o It should be marked "N" for no, the employee does not qualify for

pension. • Diocesan Priests

o Pension Code is marked "Y" if a Diocesan priest participated in the 403(b) plan.

o Pension Code is marked "N" if the priest did not participate. o Note that the amount is reported in Box 12, Code E. This amount is only

what is withheld from the priest's check and it does not include the matching employer amount.

If you have questions or are unsure {/ this information is correctly entered in your Paychex Company, contact Paychex Representative Debi Hvarven (636-519-0340 ext. 48929) or Diocesan Officefor Finances staff Chrissy Maher.

REPORTING EMPLOYER-SPONSORED HEALTH COVERAGE ON W-2 (Paychex Code E-3H: Cost of Health Coverage)

What is Reported? The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan. This is the total cost of both the employer and the employee portion of health insurance. You may be more familiar with this term as it appears in Paychex, Code E-3H: Cost of Health Coverage. You should audit this figure to ensure it is correct on each employee (see below).

Reporting the cost of health care coverage on the Form W-2 does not mean that the coverage is taxable. The value of the employer's excludable contribution to health coverage continues to be excludable from an employee's income, and it is not taxable. This reporting is for informational purposes only and will provide employees useful and comparable consumer information on the cost of their health care coverage.

The cost of the health care coverage is reported in Box 12 on Form W-2, with Code DD to identify the amount. The monetary amount is a total of both the portion paid by the employer and the portion paid by the employee. Note that there is no reporting on Form W-3 of the total of these amounts for all the employer's employees.

The Diocese will issue Form 1095-C to every employee that had health coverage through the Diocesan plan. The amount reported on this form is equal to the amount reported in Box 12 of the employee's Form W-2. Additionally, the Diocese then submits Form 1094-C, which is a total of all employees' 1095-C forms.

Reporting on Form W-2 Paychex prints W2s, so the total must be in Paychex.

Employees: the cost of health coverage must be reported for both current and terminated (in 2016) employees, for each month they had insurance in 2016.

Priests: priests receive employer-sponsored health coverage so the cost of health coverage must be reported on their W2s.

Retirees: an employer is not required to issue a Form W-2 solely to report the value of the health care coverage for retirees or other employees or former employees to whom the employer would not otherwise provide a Form W-2.

Setup in Paychex Since parish W2s are printed via Paychex, parishes are required to enter the information in Paychex as Code E-3H: Cost of Health Coverage. Code E-3H should be setup as a recurring earning to ensure that W2 figures are correct each year.

The Diocese has been working with parishes to ensure they setup the cost of health coverage in Paychex. If your parish does not have the Code E-3H setup or if you are unsure, contact Chrissy Maher in the Office for Finances.

Calculating Cost of Health Insurance For your convenience, the total cost of health coverage rates, per month, are included here. It is the total of both employer and employee portions. For example, an employee with Single coverage from January - December will have a monthly/recurring earning rate of$828.00. The 2016 total cost of health insurance is $9,936.00.

JULY 2016 RENEWAL• MONTHLY MEDlr.AI RATF

r~: ASS

~

RATE BASIS DESCRIPTION rOTAL PARISH EMPLOYEE P,l,T-F PAYS PAYS

001 Single Active Employee Only S828 00 $750.00 $78_00

001 Aclive Employee and Spouse Only, Nu Employee + Spouse Ch,ld(ren)

S1.312.00 $750.00 $562.00 ($484 i- $78)

001 Employee+ Active Employee and C hild(ren) Only. $1,216.00 ~750.00 S466.00

Child(ren) No Spouse (S388 + $78)

001 Family Aclive Employee with Spouse and

$1 ,410.00 $750.00 S000.00 Chrld(ren) ($582 + S76)

Auditing Cost of Health Coverage Totals It is recommended that you perform an audit of Code E-3H: Cost of Health Coverage in Paychex. If the amount is wrong you will have to pay to have W2s corrected. To perform the audit, simply compare year-to-date amounts in Paychex to the Benefit Allocation Systems (BAS) year-to-date bill. The totals for each employee's health insurance should be equal. If you need to make a correction in Paychex, please contact Chrissy Maher or your Paychex representative.

Additional Information on Reporting the Cost of Health Coverage, from the IRS The chart below illustrates the types of coverage that employers must report on the Form W-2. Certain items are listed as "optional" based on transition relief provided by Notice 2012-9 (restating and clarifying Notice 2011 -28). Future guidance may revise reporting requirements but will not be applicable until the tax year beginning at least six months after the date of issuance of such guidance.

The chart reviews the reporting requirements for Box 12, Code DD, and has no impact on requirements to report these items elsewhere. For example, while contributions to Health Savings Arrangements (HSA) are not to be reported in Box 12, Code DD, certain HSA contributions are reported in Box 12, Code W (see General Instructions for Forms W-2 and W-3).

F orm W2R . epo fE rf mgo mp oyer-s ,ponsore d H Ith C ea overage Form W-2, Box 12, Code DD

Do Not Coverage Type Report Report Optional

Major medical X Dental or vision plan not integrated into another X medical or health plan Dental or vision plan which gives the choice of X declining or electing and paying an additional premium Health Flexible Spending Arrangement (FSA) X ~unded solely by salary-reduction amounts Health FSA value for the plan year in excess X of employee's cafeteria plan salary reductions for all qualified benefits Health Reimbursement Arrangement (HRA) X contributions Health Savings Arrangement (HSA) contributions X ( em player or employee) Archer Medical Savings Account (Archer MSA) X contributions (employer or employee) Hospital indemnity or specified illness (insured or X self-funded), paid on after-tax basis Hospital indemnity or specified illness (insured or X self-funded), paid through salary reduction (pre-tax) or by employer Employee Assistance Plan (EAP) providing Required if Optional if applicable employer-sponsored healthcare coverage employer em player does

charges a not charge a COBRA COBRA premium premium

On-site medical clinics providing applicable Required if Optional if employer-sponsored healthcare coverage employer employer does

charges a not charge a COBRA COBRA premium premium

Wellness programs providing applicable employer- Required if Optional if sponsored healthcare coverage employer employer does

charges a not charge a COBRA COBRA premium premium

Multi-employer plans X Domestic partner coverage included in gross X income Governmental plans providing coverage primarily for X members of the military and their families Federally recognized Indian tribal government plans X and plans of tribally charted corporations wholly owned by a federally recognized Indian tribal government Self-funded plans not subject to Federal COBRA X Accident or disability income X Long-term care X Liability insurance X Supplemental liability insurance X Workers' compensation X Automobile medical payment insurance X Credit-only insurance X Excess reimbursement to highly compensated X individual, included in gross income Payment/reimbursement of health insurance X premiums for 2% shareholder-employee, included in gross income

Report Do Not Optional Other Situations Report

Employers required to file fewer than 250 Forms W- X 2 for the preceding calendar year (determined without application of any entity aggregation rules for related employers) Forms W-2 furnished to employees who terminate X before the end of a calendar year and request, in rwriting, a Form W-2 before the end of that year Forms W-2 provided by third-party sick-pay provider X to employees of other employers

The chart was created at the suggestion of and in collaboration with the IRS' Information Reporting Program Advisory Committee (IRPAC). IRPAC's members are representatives of industries responsible for providing information returns, such as Form W-2, to the IRS. IRPAC works with IRS to improve the information reporting process.

Note: Diocese of Springfield in Illinois does not charge a COBRA premium.

Source: https :/lwww.irs.gov/ Affordable-Care-Act/F orm-W-2-Reporting-of Employer­Sponsored-H ealth-Coverage Page Last Reviewed or Updated: 02-Nov-2016

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Purpose of Form A Form W-3 Transmittal is completed only when paper Copy A of Form(s) W-2, Wage and Tax Statement, is being filed. Do not file Form W-3 alone. All paper forms must comply with IRS standards and be machine readable. Photocopies are not acceptable. Use a Fonn W-3 even if only one paper Form W-2 is being filed. Make sure both the Form W-3 and F'orm(s) W-2 show the correct tax year and Employer ldentif1eation Number (EIN). Make a copy of this form and keep it with Copy D (For Employer) of Form(s) W-2 for your records. The IRS recommends retaining copies of these forms for four years.

E-Filing The SSA strongly suggests employers report Form W-3 and Forms W-2 Copy A electronically instead of on paper. The SSA provides two free e-filing options on its Business Services Online (BSO) website: • W-2 Online. Use fill-in forms to create, save, print, and submit up to 50 Forms W·2 at a time to the SSA. • File Upload. Upload wage files to the SSA you have created using payroll or tax software that formats the files according to the SSA's Specifications for Filing Forms W-2 Electronically (EFW2).

W-2 Online fi ll-in forms or file uploads will be on time if submitted by March 31, 2016. For more information, go to www.socialsecurity.gov/ employer. First time filers, select "Go to Register"; returning filers select "Go To Log In."

When To File Mail Form W-3 with Copy A of Form(s) W-2 by February 29, 2016.

Where To File Paper Forms Send this entire page with the entire Copy A page of Form(s) W-2 to:

Social Security Administration Data Operations Center Wilkes-Barre, PA 18769-0001

Note. If you use "Certified Mail" to file, change the ZIP code to "18769-0002." If you use an IRS-approved ~ vate delivery service, add "ATTN: W-2 Process, 1150 E. Mountain Dr. to the address and change the ZIP code to "18702-7997." See Publication 15 (Circular E), Employer's Tax Guide, for a list of IRS-approved pnvate delivery services.

For Privacy Act and Paperwork Reduction Act Notice, see the separate instructions. Cat. No 10159Y

TAX INSTRUCTIONS: FORM 1099-MISC

Form 1099-MISC must be issued when a parish pays at least $600.00 a year for personal services or contractual services from any individual who is not a corporate entity. Use Form 1099-MISC for items such as independent contract work, contracted janitorial, waste removal, snow removal and lawn care. Form 1099-MISC is due to the recipient by February 1, 2016.

Form 1099-MISC Submission

Copy A - Due to the Internal Revenue Service by January 31 , 2017.

All Copy A forms are attached to Form 1096 and mailed to: Department of the Treasury Internal Revenue Service Center Kansas City, Missouri, 64999

Copy 1 - Due to the State Tax Department (Not Required in Illinois).

Copy B - Due to Recipient by January 31, 2017.

Copy 2 - To be filed with Recipient's State Income Tax Return, where required.

Copy C - Payer's (Parish) copy.

Form 1099-MISC Instructions

1. Enter the Parish name, address, city, state, zip code, and telephone number.

2. Enter the Parish' s Federal Identification Number (xx-xxxxxxx).

3. Enter the Recipient's Social Security Number or Tax Identification Number.

4. Enter the Recipient's name, address, city, state and zip code.

5. Box 7 - Nonemployee Compensation. Enter the compensation amount. This includes payments, fees, bonuses, and other forms of compensation for services provided by the individual who is not an employee.

Determining Independent Contractor vs. Employee

XVIII. Personnel

A. Independent contractor vs. employee No one person should be classified and compensated as both an independent contractor and an employee.

An independent contractor is defined as an individual who follows an independent trade, business, or profession in which services are offered to the general public. The employer has the right to control only the result of the work; not the means and method of accomplishing the result.

An employee is defined as an individual who is employed by another usually for wages or salary. The employee receives benefits from the employer and is provided training on the required methods and procedures to complete the work. The employer has the right to control when and how work will be done.

Determination of whether or not an individual is classified as an employee or independent contractor is critical to ensuring appropriate compensation and avoidance of penalties imposed by IRS and state agencies. The status of an employee determines employer obligations under federal and state laws. These same laws do not apply to an independent contractor. The consequences for an employer of misclassifying an employee as an independent contractor can bring significant tax, wage and benefits liabilities, as well as massive fines that may be imposed by the IRS. The question of which category an employee fits is fundamental, yet even the courts have struggled with its determination. However, the responsibility for making the correct decision rests completely with the employer.

In order to assist the parish in the determination of the proper status of an employee the following discussion and presentation of criteria used by Federal courts provides guidance:

IRS Independent Contractor Test

The IRS formerly used what has become known as the "Twenty Factor" test. Under pressure from Congress and from representatives oflabor and business, it has recently attempted to simplify and refine the test, consolidating the twenty factors into eleven main tests, and organizing them into three main groups: behavioral control, financial control, and the type of relationship of the parties. Those factors appear below, along with comments regarding each one.

Behavioral control

Facts that show whether the business has a right to direct and control how the worker does the task for which the worker is hired include the type and degree of-

• Instructions the business gives the worker. An employee is generally subject to the business' instructions about when, where, and how to work. All of the following are examples of types of instructions about how to do work:

o When and where to do the work

o What tools or equipment to use

o What workers to hire or to assist with the work

o Where to purchase supplies and services

o What work must be performed by a specified individual

o What order or sequence to follow

The amount of instruction needed varies among different jobs. Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved. A business may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. The key consideration is whether the business has retained the right to control the details of a worker's performance or instead has given up that right.

• Training the business gives the worker. An employee may be trained to perform services in a particular manner. Independent contractors ordinarily use their own methods.

Financial control

Facts that show whether the business has a right to control the business aspects of the worker's job include:

• The extent to which the worker has unreimbursed business expenses. Independent contractors are more likely to have unreimbursed expenses than are employees. Fixed ongoing costs that are incurred regardless of whether work is currently being performed are especially important. However, employees may also incur unreimbursed expenses in connection with the services they perform for their business.

• The extent of the worker's investment. An employee usually has no investment in the work other than his or her own time. An independent contractor often has a significant investment in the facilities he or she uses in performing services for someone else. However, a significant investment is not necessary for independent contractor status.

• The extent to which the worker makes services available to the relevant market. An independent contractor is generally free to seek out business opportunities. Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market.

• How the business pays the worker. An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. An independent contractor is usually paid by a flat fee for the job. However, it is common in some professions, such as law, to pay independent contractors hourly.

• The extent to which the worker can realize a profit or loss. Since an employer usually provides employees a workplace, tools, materials, equipment, and supplies needed for the work, and generally pays the costs of doing business, employees do not have an opportunity to make a profit or loss. An independent contractor can make a profit or loss.

Type of relationship

Facts that show the parties' type of relationship include:

• Written contracts describing the relationship the parties intended to create. This is probably the least important of the criteria, since what really matters is the nature of the underlying work relationship, not what the parties choose to call it. However, in close cases, the written contract can make a difference.

• Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay. The power to grant benefits carries with it the power to take them away, which is a power generally exercised by employers over employees. A true independent contractor will finance his or her own benefits out of the overall profits of the enterprise.

• The permanency of the relationship. If the company engages a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this is generally considered evidence that the intent was to create an employer-employee relationship.

• The extent to which services performed by the worker are a key aspect of the regular business of the company. If a worker provides services that are a key aspect of the company's regular business activity, it is more likely that the company will have the right to direct and control his or her activities. For example, if a law firm hires an attorney, it is li~ely that it will present the attorney's work as its own and would have the right to control or direct that work. This would indicate an employer-employee relationship.

Employers must be vigilant about worker status when filling staffing needs. Employers, Pastors and parish administrators are encouraged to thoughtfully apply the above criteria in making a final determination of a worker's status. If needed, contact the Human Resources Department of the Diocese at 217 .698.8500 for additional assistance.

Source: Parish Guidelines & Procedures Version 3 (10.21.09)

9595 nvom ncoRRECTED PAYER'S name. street address. city or town. state or province. country. ZJP or foreign postal code, and telephone no.

1 Rems 0MB No. 1545-011 5

Blessed Trinity Parish $ ~@16 Miscellaneous 1000 Parish Lane 2 Royalties Income Scranton, IL 62345

$ Form 1099-MISC

3 Other income 4 Federal income tox withheld Copy A $ $ For

PAYER'S federal identification number RECIPIENT'S identification number 5 Fishing boot proceeds 6 M«icalnf henllli C!le~ Internal Revenue Service Center

37- 1231234 122-25-2525 $ $ File with Form 1096. RECIPIENT'S name 7 Nonefl1)1oyee compensation 8 Substitute pll)'ments in lieu o1 For Privacy Act

Olaf's Snow Removal dividends or riterest and Paperwork Reduction Act

Street address (Including apt. no.) $ 1500.00 $ Notice, see the 1225 Arendelle Way 9 Payer made dwect "3les of 10 Crop insurance proceeds 2016 General

$5,000 or more of consumer Instructions for products to " buyer Certain City or town. state or province, cou,try, and ZlP or foreign postal code (recipient) for resale ~ D $

11 12 Information Arendelle, IL 62378 Returns.

Account number' (see instruc1ions) FATCAfiling 2nd TIN not. 13 Excess golden parachute 14 Gross proceeds paid to an requirement D p.,yments attom,,y

D $ $ 15e Section 409A deferrals 15b Section 409A income 16 State tox withheld 17 State/P.syer's state no. 18 S1ate income

$ $ $ $

-$ ------------- --------------- $ - ---------

Form 1099-MISC Cat. No. 14425J www.irs.gov/form1099mi,:c D,,pa,lment of the Tre:ssury - Internal Revenue Service Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

TAX INSTRUCTIONS: FORM 1096

Annual Summary and Transmittal of U.S. Information Returns

Form 1096 Submission Form 1096, attached to all of the 1099-MISC Copy A forms, are due to the Internal Revenue Service by February 28, 2017:

Department of the Treasury Internal Revenue Service Center Kansas City, MO, 64999

Form 1096 Instructions Complete the Filer contact information. In the appropriate boxes, enter the Parish name and address, contact person, Parish phone number, fax number and e-mail address. The contact person should be the individual signing the return and who will answer questions about the form.

Box 1 - Employer Federal Identification Number.

Box 2 - Leave blank.

Box 3 - Enter total number of individual 1099-MISC forms that are attached.

Box 4 - Enter total amount of taxes withheld on the 1099s attached (normally zero).

Box 5 - Enter total amounts from all 1099-MISCs being transmitted.

Box 6- Enter an "X" in box1099-MISC (#95).

Form 1096 should be signed and dated with title of the individual signing the return.

Do Not St .... 6969 0MB No. 1545-0108

Foon 1096 Annual Summary and Transmittal of ~@16 Dep:,rtment of the T re3SUl')I

U.S. Information Returns Internal Revenue SeMce

FILER'S name

Blessed Trinity Parish

Street address finclud,ng room or suite number)

1000 Pa r i sh Lane

City or town, state or province. coonlly. and ZIP or foreign postal code

Scranton, I L 62345 Name of person to cont:ict Telephone number For Official Use Only

Dwight Schrutte (217) 280-9797 a I I I I I I I rn EITl3Jl address Faxm.mber dwight@parish . org (217) 2 80- 9292

1 Emp'oy•, identilic:ition number' 2 Social security number 3 Total number of loons 4 Federal income tax withheld 16 Total amount repo<ted with this Form 1096 37- 1231234 123-45-6789 2 $ $ 2250 . 00

6 Enter an "X' in only one box below to indicme the !vi e of form beino filed. 7 Form 1099-MISC with NEC in box 7. check .~o W-2G 1Dll7-BTC 1119B 1098-C 1096-E 11l98-0 1098-T 1099-A 109il-B 1009-C 10911-CAP 1099-DIV 1099-G 1099-INT 1Dfl9.K

32 50 81 78 8' ,. 83 80 79 85 73 91 811 92 10

D D D D D D D D D D D D 00 D D 10911-LTC 1099-MISC 1099-0ID 1099-PATR 1099-0 1099-0A 1099-R 1099-S 10119-SA 3921 3922 5498 5498-ESA 5498-0A 5498-SA

93 95 96 97 31 ,,. 08 75 1M 25 26 28 72 2A 27

D D D D D D D D D D D D D D D Return this entire page to the Internal Revenue Service. Photocopies are not acceptable.

Under penalties of pe,µy, I declare that I have examiied this ren.m and 3CCOrrc,anying documents, and, to the best of my knowledge and belief, they are true, correct. and con1)iete.

Signature II>-

Instructions Future developments, For the latest information about developments related to Form 1096, such as legislation enacted after it was published, go to www.irs.gov/fonn1096. Reminder. The only acceptable method of filing the information retl.nlS listed on this form in box 6 electronically with the Internal Revenue Service is through the FIRE system. See Pub. 1220.

Purpose of fonn. Use this form to transmit paper Forms 1097, 1098, 1099, 3921 , 3922, 5498, and W-2G to the Internal Revenue Service.

Caution: If you are required to file 250 or more information returns of any one type, you must file electronically. If you are required to file electronically but fail to do so, and you do not have an approved waiver, you may be subject to a penalty. For more information, see part F in the 2016 General Instructions for Certain Information Returns.

Forms 1099-0A and 5498-QA can be filed on paper only, regardless of the number of returns.

Who must file. The name, address, and TIN of the filer on this form must be the same as those you enter in the upper left area of Forms 1097, 1098, 1099, 3921, 3922, 5498, or W-2G. A filer is any person or entity who files any of the forms shown in line 6 above.

Enter the filer's name, adckess (l'lcluding roorn, suite, or other unit number), and TIN in the spaces provided on the form.

D ... :z./3/,:io:1.7

ate..-

When to file. File Form 1096 as follows.

• With Forms 1097. 1098, 1099, 3921 , 3922, orW-2G, file by February 28, 2017.

Caution: File Form 1099-MISC by January 31, 2017, if you are reporting nonemployee compensation in box 7. Also, check box 7 above.

• Wrth Forms 5498, file by May 31 , 2017.

Where To File Send all information returns filed on paper with Form 1096 to the following.

If your principal business, office or agency, or legal residence in

the c ase of an individual, is located in .._..

Alabama. Arizona. M<ansas, Connecticut. Delaware, Florida. Georgin. Kentucky, Louisiana. Maine, Massachusetts, Mississipp,, New H311"4)Shire, New Jeisey, New Mexico. New York, North Carolina, Ohio, Pennsylvania, Ahode Island, Texas, Vermont. Virginia, West Vrgn ia

Use the following three-line address

Department of the Treasi.ry Internal Revenue Service Center

Austin, TX 73301

For more infonnation and the Privacy Act and Paperwork Reduction Act Notice, see the 2016 General Instructions for Certain Information Returns.

Cat. No. 144000 Fom, 1096 (2016)

Diocese of Springfield in Illinois Catholic Pastoral Center • 1615 West Washington • Springfield, Illinois 62702-4757

www.d io.org (217) 698-8500 Fax: {217) 698-0802

Office for Finances

TO: All Pastors, Church and School Administrators, Parish Administrators, and Bookkeepers

FROM: John J. Maxwell, Director of the Department for Financial Services

DATE: November 29, 2016

SUBJECT: Illinois Department of Revenue Education Expense Credit

Effective January 1, 2000, any Illinois resident who is a parent or legal guardian of a student in an Illinois elementary or secondary school is eligible to take tax credit on their individual income tax return. Any amounts for tuition, book fees and lab fees in excess of $250.00 are eligible for this tax credit. The deduction is 25% of expenses in excess of $250.00 limited to $500.00 per family.

Most of you will probably be receiving inquiries from parents of your students about this credit. In order for parents to claim this credit, they will need either a receipt from the school or complete Illinois schedule ED. While schools are not required to provide written receipts, they are encouraged to issue one to each family who has had students attending during the calendar year. Many of you can limit the phone calls from parents by issuing a receipt. A sample form is enclosed. The only items on this form you may have trouble providing are the parents' or guardians' and students' Social Security Numbers. My advice would be to complete the form without the number and let the parent or guardian add the Social Security Information. Also, tuition is the amounts billed and paid to the school; free will offerings or donations to the church and school are not eligible for this credit.

Enclosed, please find two Illinois Department of Revenue Information Bulletins. One is for the school and the other is for the taxpayer. Each provides forms and examples.

Publication 112 February 2015

Education Expense Credit General Rules and Requirements for Schools

The information in this publication About this publication is current as of the date of the publication . Please visit our website at Publication 112, Education Expense Credit General Rules and Requirements for tax.illinois.gov to verify you have the Schools, provides all Illinois public and nonpublic schools the requirements for written most current revision. receipts for qualified education expenses. The objectives of Publication 112 are to

This publication is written in the plain • identify qualified education expenses. English style so the tax information is

easier to understand. As a result, we • identify Illinois schools. do not directly quote Illinois statutes

or the Illinois Administrative Code. • list requirements for written receipts.

The contents of this publication are

informational only and do not take • provide a sample of a written receipt.

the place of statutes, rules, or court

decisions. For many topics covered

in this publication, we have provided

a reference to the applicable section

or part of the Illinois Administrative

Code for further clarification or more

detail. All of the sections and parts

referenced can be found in Title 86 of

the Illinois Administrative Code.

Taxpayer Bill of Rights

You have the right to call the Department of Revenue for help in resolving tax problems.

You have the right to privacy and confidentiality under most tax laws.

You have the right to respond, within specified time periods, to Department notices by asking questions, paying the amount due, or providing proof to refute the Department's findings.

You have the right to appeal Department decisions, in many instances, within specified time periods, by asking for Department review or by taking the issue to court.

If you have overpaid your taxes, you have the right, within specified time periods, to a credit (or, in some cases, a refund) of that overpayment.

For more information about these rights and other Department procedures, you may write us at the following address:

Problems Resolution Office Illinois Department of Revenue PO Box 19014 Springfield, IL 62794-9014

Get forms and other information faster and easier at tax.illinois.gov

Contents Education Expense Credit General Rules and Requirements for Schools

General Information What are qualified education expenses? ................................................ ..................... ........... 2 What schools qualify as Illinois schools? .... ........ .................................. ..... ......... ......... ........... 2 Are Illinois schools required to provide a written receipt for education expenses? .. ............. .. 2

Sample Written Receipt .................................... .. .. ......... .... ............................... ......... 3

Office Locations ..... ... .. .... ....................... ...................... ...... .. ... .. ............ .......... .. ... ..... 4

For information or Forms ......... .. ....................................................... ....................... 4

General Information

What are qualified education expenses? In general, qualified education expenses are the amounts paid in excess of $250 for tuition, book fees, and lab fees at the school where the student is enrolled during the regular school year.

Specifically, qualified education expenses include the amount of

• tuition paid for a student who was enrolled in kindergarten through twelfth grade.

Note: This does not include summer school enrichment classes.

• book fees paid for the rental of books that were required as part of the student's participation in the school 's education program.

Note: This does not include books purchased by the student.

• lab fees paid for the use of supplies, equipment, materials, or instruments that were required as part of the student's participation in a lab course in the school's education program.

Lab courses include those courses, for which the student will receive credit toward graduation, that provide an environment for organized activity involving observation, experimentation , or practice, (i.e., science, music, art, or language).

Note: Only musical instruments rented from the school (not from a business) qualify as an education expense.

Any purchased equipment, materials, or instruments that are substantially consumed (i.e., it essentially has no remaining value) by the assignments and activities of the lab are considered qualified lab fees.

Any amount paid for the purchase of an item that will remain the personal property of the student, parent, or legal guardian at the end of the school year, is not considered a qualified education expense (e.g., payments made toward the purchase of a band instrument or athletic equipment).

What schools qualify as Illinois schools? For the purpose of the education expense credit, public or nonpublic elementary or secondary schools in Illinois that satisfy

Page 2 of 4

the requirements of the truancy law in Section 26-1 of the School Code and, if required, are in compliance with Title VI of the Civil Rights Act of 1964 qualify as Illinois schools.

Private schools providing educational instruction in the home that satisfy the requirements of the truancy law in Section 26-1 of the School Code also qualify as Illinois schools.

Are Illinois schools required to provide a written receipt for education expenses? Illinois schools are encouraged to provide a written receipt for education expenses paid at the school for the qualifying student(s) during the calendar year. The school should provide this receipt on or before January 31 of the following calendar year.

When a school provides a written receipt, the written receipt must be in the format prescribed by the Illinois Department of Revenue. An example of the receipt is shown on Page 3.

The written receipt must include the

• calendar year during which the education expenses were paid,

• name and address of the school,

• name and address of the parent or guardian who paid,

• name and Social Security number (SSN) of the student,

• grade level of the student,

• total* amount of education expenses paid to the school for each qualifying student's tuition, book fees, and lab fees during the calendar year.

*The person who paid the education expenses will use the total of the expenses minus $250 to calculate the allowable credit.

Note: All information on the receipt is confidential information for use only as supporting documentation of the education expense credit claimed and shall not be used for any other purpose.

PUB· 112 (R·02/15)

Sample Written Receipt for Schools I Education Expense Credit I I General Rules and Requirements for Schoolsi

{J Illinois Department of Revenue

Receipt for Qualified K-12 Education Expenses To be completed by school personnel and distributed to parents or guardians ----

Calendar year

Read this information first Parents or Guardians: Attach this receipt to your Form IL-1040, Individual Income Tax Return, if you figure an Illinois Income Tax credit for education expenses.

I Note !To figure the amount of your credit, you must complete Schedule ICR, Illinois Credits.

Step 1: School Information:

Name of school

Address of school

City, State, ZIP of school

Step 2: Parent or Guardian Information:

Name of parent or guardian

Address of parent or guardian

City, State, ZIP of parent or guardian

Step 3: Student Information:

1 Complete the following information for each qualifying student from the family listed above. Please list each student on a separate line.

Column A Column B Column C Column D Student's name Social Security number Grade Total tuition,

(K-12 only) book/lab fees

a --- -------- --b --- --- ----- --

C --- --- ----- --d --- --- ----- --e --- -------- --f --- --- ----- --

g --- --- ----- --2 Add the amounts in Column D for Lines 1 a through 1 g. This is the total amount of

qualified education expenses paid to this school for the calendar year. 2

IL-1040-Rcpt (R-02/15)

PUB-112 (R-02/15) Page 3of 4

I Office locations I

200 South Wyman Street

Maine North Regional Building

9511 Harrison Street FA 203

Des Plaines, Illinois 60016-1563

847 294-4200

Rockford, Illinois 61101-12371----~.,_ __ _

815 987-5210

Education Expense Credit General Rules and Requirements for Schools

James R. Thompson Center

-111~-1 Concourse Level 100 West Randolph Street

Chicago, Illinois 60601 -3274

800 732-8866

217 782-3336

_________ ,.._-1Willard Ice Building

15 Executive Drive

Business Center One, Suite 2

Fairview Heights, Illinois 62208-1331

618 624-6773

For information or forms

2309W. Main

Suite 114

Marion, Illinois 62959-1196

618 993-7650

Visit our website at tax.Illinois.gov. Call us at 1800732-8866 or 217 782-3336.

Call our TDD (telecommunications device for the deaf) at 1 800 544-5304.

101 West Jefferson

Springfield, Illinois 62702 800 732-8866

217 782-3336

Write us at Illinois Department of Revenue, P.O. Box 19044, Springfield, IL 62794-9044.

Page 4 of 4 PUB-1 12 (R-02/15)

Calendar year

Recipients: Attach this receipt to your Form IL-1040, Individual Income Tax Return, if you figure an Illinois Income Tax credit for education expenses. You may have more than one receipt if you have more than 5 students attending the same school or if your children attend different schools.

=Note-i You must complete the ED Worksheet in the Form IL-1040 Instructions to figure the amount of your credit.

Received From: Name of parent or guardian

Address of parent or guardian (This required information may be provided by the recipient.)

City, State, ZIP of parent or guardian

Social Security number of parent or guardian

Name of Student Social Security Number Grade (This required infonnation may (K-12 only) be provided by the recipient.)

1 _________ _

2 _________ _

3 _________ _

4 _________ _

5 _________ _

Paid to:

Tuition

6 Add the amounts in the "Total" column. This is the amount of your education expenses. Write this amount on Line 1 of the ED Worksheet found in the Form IL-1040 Instructions. The ED Worksheet allows you to figure your education expense credit.

IL-1040-Rcpt (R-1/04)

Name of school

Address of school

City, State, ZIP of school

Telephone number of school

Book Fees Lab Fees

Total

Total