We occasionally receive a love offering for our senior pastor or other staff members. How should we handle these gifts? The phrase ‘love offering’ does not appear in the federal income tax code or Treasury Regulations. It seldom appears in court cases. Still, love offerings have...
The designated housing allowance may be reflected on Form W-2 in Box 14 with the notation, “Housing Allowance.” Though not required, this reporting method is suggested by Publication 517. Or, a church can report the designated housing allowance to a minister by providing a statement separate...
Documentation of expenses is vital to an acceptable accountable reimbursement plan. Pre-Covid, ministry mileage driven is generally the minister’s greatest expense. Some ministers have contended that every mile they travel is in the furtherance of their ministry – and thus reimbursable. Their contention is based upon...
As the economy continues to expand, churches now more than ever need to possess a thorough understanding of the classification for each person performing services for the church. Knowing whether the IRS views someone as your employee or as an independent contractor dictates tax obligations...
Self-employment tax Clergy are not eligible to have FICA taxes withheld from their church compensation. In lieu of FICA taxes, clergy pay self-employment tax, also known as Self-Employment Contributions Act tax (SECA). Reimbursements from an employer of SECA are taxable as wages. However, even though...
While ministers are employees for federal income tax reporting purposes, they are self-employed for Social Security purposes with respect to services they perform in the exercise of their ministry. This means that they must pay both the employee and the employer share of social security tax...
Like other corporate entities, churches encounter business activities that must be completed just before, or soon after, the end of the calendar year. Now is the time to make plans for these various tasks. The questions that follow can be used as a checklist for...
Would your budget survive if you suddenly had to pay your volunteers for their time? Most nonprofits would answer with a resounding "no." But financial gain isn't the reason your volunteers show up to help. They are actively supportive because they believe in your organization's...
The answer is “both.” Ministers have what is commonly referred to as “dual tax status.” For federal income tax purposes, a minister is generally treated as a common-law employee. For payments into Social Security, the minister is always self-employed. This is an IRS regulation and...
If your church pays musicians to perform during services or other events, you’ll need to determine if they are employees or independent contractors. The biggest distinction between W-2 employees and 1099 workers is the amount of control you have over them. With a W-2 employee, you have...