apply to ministers who are always self-employed for FICA taxes, which means they are responsible for the full 15.3 % SECA tax and thus the church cannot submit ministers payroll taxes to the IRS. Our resources help churches and pastors make the right choice in regards to important tax considerations.
Ministers are generally considered employees for federal and state taxes; therefore, they receive a form W-2 from the church. This dual tax status is often very confusing to ministers and the churches they serve. Some accountants and CPAs who do not understand this unique tax status of ministers often give ministers and churches incorrect information.
Ministers are also exempt from federal and state withholding; therefore, many ministers file quarterly estimated tax payments. Ministers may request voluntary withholding by the employing church, but they must complete a W-4 and NC-4 to indicate how much income tax the church is to withhold and remit to the taxing authorities. The church should never send social security tax dollars to the IRS.
Unfortunately, many churches use the “lump sum” pay package approach to compensate their staff. A “lump sum” pay package means the church identifies the total pay and then permits the employee to indicate how they wish to receive the money. Please note the following “dangers” inherit in the lump sum approach:
- A lump sum is misleading to the staff person and the congregation.
- Staff may choose cash over insurance protection and retirement participation.
- Staff may pay unnecessary taxes.
- Church may incur financial burden.
- Depending on how it is structured and administered it may not meet the IRS tax code.
Minister's Tax Guide
- Section 1-4: Tax Preparation Guide - Detailed tax information to assist ministers with annual tax preparation.
- Section 5: Federal Reporting Requirements for Churches - being in compliance with the law and IRS requires being informed of reporting requirements for churches.
Ministers' Tax Issues - this brochure explains the various tax issues unique to minister.
Ministers' Housing Allowance - churches are able to designate a portion of the minister’s salary as a housing allowance per specific IRS guidelines.
Financial Checklist for Ministers - this brochure highlights areas for ministers to be informed concerning compensation and other financial matters.
2016 SBC Church Compensation Survey - this survey assists ministers and lay leaders as they evaluate equitable compensation for staff.
2017 IRS Standard Mileage Reimbursement Rate - stay up to date with the current IRS Standard Mileage Reimbursement Rate for ministry-related expenses
United States Government Resources
Internal Revenue Service
Social Security Administration
- Full Retirement Age for Social Security
- Earnings Limit for Taking Social Security before Full Retirement Age