How to Do Payroll

How to do payroll properly for a church or nonprofit can be a daunting task.

There are so many changing laws that keeping up with them all can be equally challenging.

How to do Payroll for a Church

How to do payroll tips:

If you are going to use a payroll software, I can recommend Full Service Patriot Payroll. I use this software for my clients and can personally recommend it. It is much cheaper than Intuit Full Service Payroll which I have had multiple issues do set up your own payroll and you will have to know what to mark exempt and what not to. Their support is awesome and a great help...but not all of them are familiar with churches and nonprofits. 

I have heard that Gusto Payroll is another affordable option. One of my clients use them and said that the set up was easy and their support is good. Another plus for them is they are partners with Aplos

Even if you hire a payroll service you need to be familiar with how to do payroll for your church or nonprofit organization, because when it comes to penalties ... it will be your organization that will be held responsible.

Speaking of payroll services, make sure the one you are currently using or considering is familiar with nonprofits, churches, and ministers. BUT even if they say they are know how to handle a church's payroll, YOU need to know how to handle ministers payrolls (ministers are NOT paid through the FICA system!) and what churches are exempt from and what they are you can be sure they are handling correctly. Tip: churches are exempt from FUTA (Federal Unemployment Tax Act). If your payroll provider is telling you that your church is required to pay it...find another provider!

Another issue you should be familiar with is the classification of your workers.  Due to the passage and implantation of the Affordable Care Act, the IRS has stated that they will be looking closer at employee classifications. So knowing how to classify workers is a must. See Misclassification of Workers.

Learn what forms you need to file and when they are due on the articles below as well.

Learn more ...

Payroll can be a daunting task for volunteers and paid staff of small churches and nonprofits. See this step by step guide to ensure you have your i's dotted and your t's crossed ...

Step-by-step Payroll Guide

How To Guide for Small and Growing Churches

The Church Accounting: How To Guide devotes a whole section of the book to payroll for churches. It covers payroll terminology and forms and then takes you through the steps necessary to set up a payroll, calculate and file the necessary taxes and forms, and even details how to handle the minister's payroll. It also includes sections on filling out IRS forms: 1099, 1099-NEC, and 1096.

If you have QuickBooks or are considering using it in the future, go ahead and purchase the QuickBooks for Churches and the How To Guide combo for a complete package on setting up and administering a payroll using QuickBooks.

QuickBooks for Churches & Church Accounting Combo Bundle

One of the biggest challenges facing small churches and nonprofits today is how to properly manage payroll for their organization. See how to deal with these payroll issues ...

Manage Payroll

The IRS has the authority to assess a 100% penalty against the individual(s) responsible for withholding and paying federal payroll taxes, even if the person is an unpaid volunteer such as a church Treasurer.  The IRS aggressively uses this authority...

Federal Payroll Tax Issues

Church Accounting Package

A set of 4 ebooks that covers the following topics...

  • Fund Accounting Examples and Explanations
  • Setting up a fund accounting system
  • Donation management
  • Minister compensation and taxes
  • Internal controls and staff reimbursements
  • Much more - Click here for details

Misclassification of workers is a big concern for many churches and nonprofits. See how to classify your workers...

Misclassification of Workers

Staff gifts are nice and most organizations give their staff a gift for Christmas or Thanksgiving. However...before you write that check or buy that turkey there are some facts regarding the tax consequences of those gifts you should know...

Staff Gifts

If you are a nonprofit or church, you are required to withhold and pay federal payroll taxes on your nonminister employees. See how to calculate those payroll taxes ...

Payroll Taxes

A form W-2 Wage and Tax Statement tells the IRS, the SSA, and the employee the amount of wages and withholding for the year. See how to complete this form and its accompanying Form W-3 for employees and ministers ...

Form W-2

If your church or nonprofit paid $600 or more in rents, services, prizes and awards and other income payments, you must complete and file a 1099 form ...

Form 1099

Form 941 is used to report the number of employees, total wages paid, withholding, and total payroll taxes due for the quarter ...

Form 941

Spreadsheet Package

The Spreadsheet Package includes:

  • Contribution Tracking Workbook
  • 5 Fund Automatic Accounting Workbook 
  • Bank Reconciliation Workbook
  • Collection Count Sheet
  • Mileage Log Workbook 
  • Much more - Click here for details

PLUS a Word document with 3 examples of contribution statements for cash, non cash, and quid pro quo donations that you can customize for your own use!

Fringe benefits are great to include in your pastor’s compensation package and offer to your staff; however, there are a few factors you should consider before you put together those benefits...

Fringe Benefits