Questions on Minister's Taxes

My husband is a new pastor and we are very confused. He has just been ordained and has had his housing allowance confirmed by the board. We just received his first paycheck after that and wow are we confused.

There was a very small amount taken out for Federal, state, medicare, and soc sec. It seems too low. His taxable income was $771 (for 2 weeks) after housing allowance deductions. There was only approx $65 taken out.

Are we supposed to pay tax estimates? We have not opted out of Soc Sec. yet, but we will. What should we expect with that if we do also? His salary is $36000 per year with $23785 designated for housing allowance from that. Meaning, $12216 is taxable income.

Vickey's Relpy

Well, first of all, if your husband meets the IRS’s definition of a minister and it seems from the information you have provided he would, then the church should not be holding out any Social Security or Medicare taxes.

Ministers pay their social security taxes through the SECA system.

See this post.

I would print off the IRS Pub 517, and submit it to your church.

As far as opting out of Social Security,…” the exemption application (Form 4361) must be filed on time with the IRS. The deadline is the due date of the federal tax return for the second year in which a minister has net earnings from self-employment of $400 or more, any part of which derives from the performance of services in the exercise of ministry. In most cases, this means the form is due by April 15 of the third year of ministry.”

In the meantime you will need to continue paying Social Security taxes until you are approved by the IRS.

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