Check your state exemption labor and tax laws!
Do not assume just because your church or nonprofit organization is exempt on a federal level that it will be exempt on a state level.
For example, churches are exempt from federal unemployment taxes.
However, you need to consult your state's unemployment tax agency to ensure your state grants an exemption from unemployment taxes.
Another example...a minister's housing allowance is excluded from federal income tax; however, a reader in Pennsylvania stated that housing allowance payments were not exempt from income taxes in his state.
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.
So research your state's labor and tax sites. Get on the phone and talk to a “knowledgeable” person about what the state expects from your organization and what your church or nonprofit is exempt from and what it is not exempt from.
I also think we could all help each other by using this page to share state regulations in regards to churches and nonprofit organizations.
Use the form below to comment on your state regulations in regards to churches and nonprofits. You can also use the forum to ask questions. However, be aware that your question may go unanswered for awhile until someone from your state can reply ... or until you find the answer from your state's appropriate agencies and can post your own answer :)
Do you have a question or comment regarding your state exemption regulations? Share it!
The following comments, tips, and Q/A were provided by FreeChurchAccounting's generous readers:
Tax exempt status
A church member occupies the parsonage for a fee. This fee is reduced with an agreement to perform duties at the church before and after church hours. …
State Sales Tax - LA Not rated yet
Louisiana does not exempt churches from sales tax. Sales tax not collected at time of purchase on items used in the operation of the church such as bibles, …
Separate Accounts for Designated and Restricted Funds Not rated yet
Does the State of Tennessee require churches to keep two separate checking accounts for designated and restricted funds?
Georgia Sales Tax Not rated yet
Georgia is one state that does NOT give churchs an exemption for Sales Tax. Churches must pay sales tax on items used to operate the ministry.
The comments above are for general information purposes only and do not constitute legal or other professional advice on any subject matter. See full disclaimer.