Skip to main content

Ministers Performing Both Ministerial and Non-ministerial Duties

By Anonymous
Question:

 An ordained minister perform typical ministerial duties. He also assists with bookkeeping and other administrative functions, but these functions are not his primary role. He raises his own support, which is given to the organization as designated/restricted funds for his needs. While the organization has leadership and a board which determines direction and vision, his hours are not specifically set and the manner/method of work is unspecified by the organization.

1.) Is he an employee or an independent contractor?
2.) If he is an employee, can the organization pay half of his social security and Medicare (FICA tax)? 

 Answer:
Both employee ministers and independent contractor ministers pay their own self-employment tax. According to IRS Publication 517 ministers have the responsibility to pay self-employment tax. Publication 517 states, “These services [of a minister] include: 
  • Performing sacerdotal functions,
  •  Conducting religious worship, and 
  • Controlling, conducting, and maintaining religious organizations (including the religious boards, societies, and other integral agencies of such organizations) that are under the authority of a religious body that is a church or denomination."
The Publication continues: "You are considered to control, conduct, and maintain a religious organization if you direct, manage, or promote the organization's activities.”

In the case above, the minister is likely considered an employee minister according to these standards, and, therefore he would receive a Form W-2 (MinistryCPA Blog Post).

Regarding, his non-ministerial duties of bookkeeping, it is subject to FICA tax which is withheld from an employee at the rate of 7.65% and matched by the employer/church. He remains responsible for SE tax on his ministerial employee compensation. 

 We find that this situation is common to ministers. For example, churches that have schools often find their ministers performing non-ministerial, FICA tax-subject duties (e.g., coaching an athletic team).

See previous post concerning the subject of a dual status employee:
http://ministrycpa.blogspot.com/2012/10/review-of-form-w-2-reporting-for.html
Labels:

Comments

Post a Comment

Popular posts from this blog

Church Car Purchase for Pastor

By
Question: A church would like to purchase a car for the pastor's use. What is the best method to accomplish this goal? Should the car be titled in the pastor's name? What will be the tax consequences of this arrangement? Answer: The church has two main alternatives for this purchase:  Title the car in the pastor's name and reimburse him for business expenses Title it in the church's name and treat personal use as taxable compensation There are fewer immediate tax consequences for the latter. Since both are viable options, we will discuss both situations in this post. If the church chooses to give the car to the pastor and register it in his name, he is free to use it for whatever personal use he desires with no tax consequences. However, the fair value of the car is taxable as compensation at the time it is given to the pastor. Internal Revenue Code section 102(c) clearly states that gifts given to employees by their employers are taxable compensation. The...
2 comments
Read more

Can Form 4361 be filed after the deadline?

By
Question:   Is it possible to opt out of Social Security after the 2-year deadline? Answer:  Unlike other employees, a licensed or ordained minister has the option to opt out of Social Security and Medicare (FICA). If a minister wants to opt out they must file Form 4361 by the tax deadline including extension, in the second year in which they have received ministerial income of $400 or more. This election is final, and the minister cannot opt back into FICA taxes.  At MinistryCPA, we have received questions from ministers who have exceeded the two year deadline and desire to opt-out. There have been several court cases which provide guidance in answering this question. Some have argued that the minister was unaware of the deadline, had mistakenly believed they had filed a timely election, were given incorrect advice by an IRS employee, or their opposition to participate in Social Security and Medicare did not arise until after the 2-year deadline had passed. In each of th...
Post a Comment
Read more

Form 941 or 944 - Which Should a Church Use for Payroll Reporting?

By Anonymous
Question:   Are churches required to file a Form 944 annually to report their employees' earnings and tax-withholdings? A quarterly Form 941 (rather than an annual Form 944) is required of some employers. Which IRS form, if any, should be filed? Answer: According to IRS Section 1402(c) and 3121(c), ministers are not subject to mandatory income tax withholding. Unless one or more ministerial employees request non-mandatory withholding, church employers with only ministerial employees do not need to file Form 941 or Form 944.  The IRS  Ministers Audit Techniques Guide  explains in further detail a minister's treatments for Social Security, Medicare tax, and income tax withholding.   Form 941 or 944 must be filed when non-ministerial employees are compensated or when ministers request withholding. When can a church file the annual Form 944 rather than filing Form 941 each quarter? The IRS may permit the annual filing of Form 944 for employers wh...
Post a Comment
Read more