We withhold and match the amount of our pastor's and assistant pastor's SE tax. This is remitted on a quarterly basis. If the total due has been overpaid, they are entitled to a refund.
It seems to me that we should limit the amount that they have withheld and that we match. Otherwise, if they receive a refund, the church has paid more than their fair share. I have asked our pastors to contact their accountants to determine the amount of SE tax that should be remitted on a quarterly basis so that they will essentially break-even in regards to SE tax owed or to be refunded.
Does this make sense? At the same time, if we have withheld it, I would think we need to remit it or run into a mess in having to recalculate paychecks and refund amount.
Also, I have been told that we don't really need to submit SE tax for clergy. Is this true? I am not looking to eliminate any benefits that were established for the pastoral staff, but we get into a financial crunch when the quarterly remittance is to be sent in.
Thanks for any insights you can provide.
It is very nice that you do that for your pastors; however, all of the estimated tax payments (I am assuming that is what you are referring to) that you send in for them including the amount the church matches is taxable income to your pastors.
So it would not matter is any of it was refunded back to them. It is their money.
And no...a church is not required to submit estimated tax payments for their ministers, nor should they withhold and match FICA (Social Security and Medicare tax). Ministers are considered self-employed when it comes to self-employment tax (Social Security) and are responsible for paying their SE tax themselves.
You might want to advise them to consult a knowledgeable CPA regarding this issue.