Filing a 941 for clergy that is exempt from social security and medicare taxes

I file the IRS 941 form and check and highlight the line that says we are exempt.

I even enclose the Pastor's Exempt form, but the IRS is still coming back asking for it and I cannot seem to get them to understand that he is exempt.

At the end of the year, do I still file the copy with Social Security? They are now coming back on me from 2007 asking for it with a heavy penalty.

Vickey's reply

You know...I have never had any trouble filing our 941 for our pastor’s taxes till this last quarter. My husband was in the hospital and I asked the church secretary to fill it out. She didn’t know to check that exemption box on the 941 form and we received a letter from the IRS a couple of weeks ago saying we owed over $1000 in back taxes(Social Security and Medicare) and penalties.

I was on the phone with them all day one day trying to straighten it out. In our case I had to file a form 941X: "Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund" to straighten out our mess. I have not heard back from them yet...but according to the IRS representative I talked to...that would take care of it.

In your situation...if you checked that box and followed all the 941 instructions...and are still not seeing your issue resolved, you need to contact a CPA or tax consultant that specializes in church and minister’s taxes and see if they could straighten it out for you.

One additional piece of advice, I wouldn't include or send any additional documents or forms along with the IRS form 941 or with the W-3/W-2. It will cause your form to be pulled aside and examined closer.

Please consider purchasing the Church Accounting Package which includes the Clergy (Minister) Tax Guide

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Join in and write your own page! It's easy to do. How? Simply click here to return to IRS Form 941.

If you want to DIY your payroll, I highly recommend you look at using Gusto! It is very user friendly and their support is awesome! Plus they know how to set up and maintain payrolls for churches and nonprofit organizations.

Note: I am a "partner" of Gusto, but as I have told you before ... I never recommend anything that we or our clients have not tried and love =)

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