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Pastors with secular jobs.

by Oral Walters
(Coral Springs, FL)

I am a fulltime pastor as well as a fulltime employee for a non-religious company.
My income is taxed and withheld in the non-religious company, is it necessary for the church also to withhold federal income taxes from the salary that I receive from the church?

Answer

See my clergy tax page.

"Churches cannot withhold taxes from ministers' pay without the minister's authorization. Ministers are exempt from income tax withholding whether they report their income taxes as employees or self-employed; ministers who report their income taxes as an employee can request voluntary withholding by submitting a Form W-4 to the church."

However, that does not mean you are exempt from income tax and in fact are taxed even more because you have to pay self-employment taxes as well, so you may want to consider requesting your church to withhold income taxes on you or you can also send in estimated tax payments.

Hope this helps,

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Jun 01, 2010
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Pastors with Circular Jobs
by: Dave Llewellyn Dixon, CPA, MST

Vickey is right on the point. Let me expand on this a little. Every person who works and earns wages, (pastors or non-pastors) is required to pay two types of taxes as follows: (1)Income taxes and (2)social security taxes commonly referred to as FICA taxes. If you work for a company (as with your secular job) your company has the responsible for withholding both of these taxes from your pay before you receive it so you do not need to worry about that. In addition, the income you receive from your church job as a pastor is still subject to the two taxes mentioned above. The main difference is that, unlike your secular job where the company is mandated to withhold both taxes, the church must obtain your permission before witholding the first tax i.e. income tax. With respect to the 2nd tax, i.e. FICA, they are not allowed to withhold this at all (with or without your permission). You may give them permission to withhold the first type of tax i.e. income taxes or you can pay the income taxes yourself on a quarterly basis to the IRS. It is easier to just have the church withhold it and pay it on your behalf. Since you cannot give the church permission to withhold the 2nd tax i.e. FICA, you have to calculate that yourself. It is generally 15.3% of 92.35% of your NET income from self employment (your job as a pastor is considered as if you were self-employed hence the term self employment income). Note this percentage is applied to your NET income from self-employemnt which is not necessarily your income from the church since your church income is your gross income. Once you calculate this net income from self-employment, you have to pay it over to the IRS. The 15.3% is the same percentage that is applied to your secular income but the difference between the application of this percentage to your secular inocme vs your church income is;
with regards to your secular income, one half of the 15.3% (7.65%)is deducted from your secular salary and the other one half is paid by your secular employer. When you are self-employed, as in the case of being a Pastor, you are your own employer. Therefore, you have to pay both halves i.e the half normally deducted from your salary by your employer and the half that the employer pays since you are your own employer. This is one disadvantage of being self-employed.

Visit my website: www.dldixoncpa.com or e-mail me at dave.dixon@dldixoncpa.com, Telephone: (301)861-0000 Ext 301 for personal consultation.

God bless you.

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