I am the pastor of a small mission church and currently do not take compensation for my ministerial services (I also have a secular job). I am interested in beginning to take a small stipend on a bi-weekly basis and need some advice. I have no experience in tax matters!
Our monthly offerings range from $400-$450. Our operating budget (facility rental, advertisements, liability insurance) is $350.00 per month. I generally purchase church supplies from my own funds, with only occasional, limited reimbursement.
My plan is to take stipend of a percentage (10%-20%)of the offerings above-and-beyond that needed to meet the budget.
Please give me the basics in what I need to do regarding payment of the various taxes, setting up FICA and other payments, etc.
First of all, even though it will be a very small amount, the IRS frowns on ministers taking a percentage of the church’s offering because it can fall under their definition of private benefit and inurement. So if you do take a percentage, make sure you include a cap on the salary amount. Put it in writing such as in your official minutes.
To be considered an employee of the church, you would need to fill out a W-4 and keep on file at the church. On the W-4 you can request some income tax to be withheld if you want to.
You or the person who takes care of such things would need to send these withheld amounts out on a quarterly 941 form.
As you are considered self-employed in regards to social security taxes, (FICA and SECA) the church will not be required to withhold or match any social security or medicare taxes.
The church would then report your income on a W-2 form each year.
Need training on how to use QBO or Aplos effectively for a church or better yet ...need an expert in either of those accounting software to do your monthly bookkeeping and/or payroll? See more on our accounting services!