Witholding Tax credit?

by Marion
(Minnesota)

There is a tax credit for churches if you pay in witholding tax. We have not paid witholding tax in the past, but we were told to start witholding from the Pastor's payroll, so we can get a tax credit back up to $4000. Would this put the Pastors status in jeopardy or raise a red flag for audit? My understanding is that if you are required to pay witholding , then you qualify - but should we start doing it anyway, if I can save the church money or is the hassle not worth it - would it trigger audits for past years?

Comments for Witholding Tax credit?

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Feb 04, 2014
Withholding Tax credit?
by: Anonymous in NC

Withholding taxes from your pastors pay is not an option for the church; it is only an option for the pastor to decide if he/she wants taxes withheld. He/she is allowed to be exempt from withholdings; instead, he/she files quarterly estimates for income taxes and payments.

Whether the church qualifies for a withholding tax credit or not should the pastor choose to have withholdings would be a good question to ask the IRS. Good luck with this.

Feb 08, 2014
Tax credits for churches
by: Bill OConnell

Marion

Your question is not clear about the tax credit you are seeking for your church. However, I will guess that it is the refundable credit for Healthcare insurance provided to your clergy and/or staff.

If that is the case, please see our website www.wisdomoverwealth.com . There are refundable credits available to the church equal to 25% of healthcare premiums paid on behalf of the church's employees/staff/clergy. This credit (think refund of cash paid to the church by IRS) is limited to the amount of taxes sent to IRS via forms 941.

The practical impact is that clergy should be encouraged to pay the voluntary withholding (mentioned in Anonymous posting) and have it reflected on their Form W2. This also relieves the clergyman of the burden of remembering to pay quarterly estimated payments.

Call us at Wisdom Over Wealth with further questions. We have recovered over $800,000 for churches in this program.

Feb 08, 2014
Tax Credit
by: Anonymous

Thank you - that is the tax credit I was referring to. We are not required to send in a 941 due to the only staff is our pastor. This would not apply to SE Tax if I understand it. I don't think we should pay payroll tax for our pastor if he hasn't done it to this point. I would love to gain additional funds for our church - but not sure that this credit would be applicable for us. We will have to file unrelated business for 990T for the first time this year due to a purchase of multiple use office space.

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