Small Church Pastor Employee or Self Employed

by PSM
(NC)

If a small church has no employees other than the pastor, is the pastor considered Self Employed or an employee? The person who does taxes for our pastor and his wife is pushing for a W2 and a State EIN. State will not issue EIN unless we are planning to withhold taxes.

Comments for Small Church Pastor Employee or Self Employed

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Feb 15, 2012
W-2 or 1099 form
by: David Rutledge

It does not matter if the pastor is the only employee. He is an employee for income tax purposes and self employed for social security purposes. He would receive a W-2 on the salary portion that he is receiving.

If all of the money that the pastor is receiving has been designated as housing allowance then no W-2. Housing allowance does not have to go in Box 14 of the W-2

Feb 15, 2012
W-2 when witholding estimated taxes but
by: Gordon

We have a PT Assistant Pastor (started Jan 1st 2012) who primarily preaches. His pay is $20,000 annually.

He is claiming the full $20,000 as Housing allowance.

I just took over as Treasurer. the previous Treasurer calculated his pay with Employer SS and Med of $1,530 per year and we are paying it as estimated federal taxes.

How would I issue a W-2 with $20,000 as housing and $1,530 paid as taxes? Should we be paying any taxes on him?

Thank You for this wonderful ministry

Feb 17, 2012
Pastor Employee or Self Employed
by: Terri

Your state does not issue the EIN. Your church can receive an EIN through the IRS for free.

If you have opened a checking account for the church, in the church's name, you would have been required to have an EIN.

You can complete the form on the IRS website and receive the EIN immediately.

Your pastor determines whether he opts out of withholding taxes, he also determines the amount of his salary that is allocated for his housing allowance - not the church committee.

His entire salary can not be allocated for the housing allowance - that is against IRS regulations - so be careful on that point.

If he chooses to be self-employed, then your church would issue a 1099. To be considered self-employed, your pastor would have to have additional income from some other source.

If you are his only income, he is not self-employed.

Apr 16, 2012
Pastor
by: Anonymous

I work for the Church as a part time Pastor, also I work for the government, and I get all my benefit from them.

I get $10.000 annually from the Church

My question is:

I can put all the $. 10.000 in housing allowance

so the way I do not have to worry about to track miller or others expenses.

thanks you very much

Nov 01, 2012
Employee, EIN, and Housing Allowance
by: Vickey

These are all wonderful answers. I know it is a little late but I would like to add my 2 cents in too :)

To determine if a pastor is truly an employee of the church, look up your federal and state labor laws.

Employee or Self-Employed?

Unless the pastor exercises full control over the church, they are usually considered an employee for income tax purposes and should be issued a W-2. (David's answer above explains the dual status)

Teri is right, your state does not issue the federal EIN (Employer Identification Number) you need to set up a payroll. You will need to apply for a number by filling out IRS Form SS-4. You can get the number immediately, either by phone or online. However, some states required you to file for state and local employer identification numbers also, so check with your state revenue department.

Gordon and Anonymous, due to my husband's illness, I was unable to answer your questions when you posted them. Hopefully you got satisfactory answers, but I will answer them now for anyone reading this with the same questions:)

Gordon the $20,000 housing allowance would have went in box 14 of his W-2 (optional…it can be in letter form from the church as David stated in the above post) and the $1,530 paid in estimated tax payments would have went in box 1 as it is income.

There is nothing in the IRS tax codes that I know of (please post if you know where it states that it cannot)...that says 100% of a minister’s compensation cannot be designated as a housing allowance.

However, it would be good if the minister had another form of income, support, or can rely on spouse’s income to pay for all other expenses or they may face some issues if ever audited.

Remember that a minister can only claim the lesser of (1) the actual housing allowance, (2) the amount actually spent on eligible housing expenses, or (3) the fair market rental value plus furnishings and utilities.

Anything over that lesser amount has to be included as income.

One more thing...a minister cannot claim a housing allowance if it is not first legally designated and set up by the minister’s employing church. See this page for more information: Seting up a Housing Allowance

Nov 27, 2012
Housing & W2 or Self Employed
by: MJB

Small Church and Pastor is not paid a salary. He gets 'love offerings' only.
The home he resides in is owned by the Church, and the Church pays the City utilities and the property taxes. How is the housing treated? and should we be recording the amounts of the 'love offerings? is that income?

Feb 03, 2016
Unpaid Pastor and Expenses
by: Anonymous

If the church does not pay the Pastor a salary nor provides housing but the Pastor pays a majority of the expenses out of pocket can they file their position as a Pastor as self employment (Sch.c) along with the expenses they paid on behalf of the church or will the expenses need to be filed as a donation on form 2106?

Feb 04, 2016
Unpaid pastor & Expenses
by: Anonymous

If a person is not getting paid of any kind (no non accountable expense reimbursement)no salary, and there is no housing allowance, it sounds like the person is a volunteer.

A volunteer would deduct the expenses on schedule A under contribution. They would not be deductions on a 2106 form because he is not an employee.

I would probably want a contribution receipt from the church acknowledging the work that was done, no amount on the receipt. The mileage rate would be the contribution rate, 14 cents / mile, not the business rate that would be on the tax return

David Rutledge
800-669-1040

Aug 16, 2017
Pastor Salary NEW
by: Jimmy

Can the pastor not take a salary, and then the amount the church determined to pay him go to the church employee? The church would withhold the taxes and pay them, but the pastor would not receive anything from the church. Is this in any way a violation to the IRS?

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