Payroll Taxes: Does your Organization Have to Match Medicare and Social Security Tax?
Is the church or nonprofit required to withhold federal payroll taxes from its employee paychecks?
If you are a nonprofit, you are required to withhold and pay federal payroll taxes.
If you are a church and if you have any non-minister employees, you must withhold Income tax, Social Security tax, and Medicare tax (FICA) from their paychecks.
Even if your church only has minister employees, you still may have to withhold income tax, if your minister has elected voluntary income tax withholds on his W-4. So, most churches will be required to withhold payroll taxes and remit them to the IRS.
How do you calculate payroll taxes?
Each employee, including the minister if he has elected voluntary income tax withholding, must complete a W-4.
For non-minister employees, you must withhold the following taxes:
Social Security payroll tax is 6.2% of gross wages.
Medicare payroll tax is 1.45% of gross wages.
Does the church or nonprofit have to match Medicare and Social Security tax?
Yes. Your organization must match the FICA tax withheld from your non-minister employee payroll checks.
The amount of the matching federal payroll taxes is:
Social security 6.2%
Medicare 1.45%
Total matching 7.65%
Regarding Medicare and Social Security tax and minister's paychecks...see my
Clergy Tax page
Is your organization considered small, medium, or large by the IRS? Your
payroll tax liability
determines how often you have to pay your payroll taxes to the IRS.
Do Churches have to pay federal or state unemployment taxes?
Churches are exempt from federal unemployment taxes. Many states also grant exemption to churches from state unemployment taxes.
Consult the state unemployment tax agency for your particular state to make sure your state grants an exemption to churches
Additional Resoures
For those of you residing in the beautiful country of Canada, I found a great payroll tax resource for you...
Church Treasurers of Canada Inc.
This article is a great resource. It tells who you should hold FICA out for and who you shouldn't. Also tells who you should send a W-2 to and who you should send a 1099MISC to.
You Be The Judge: Payroll Tax Mistakes