Skip to main content

When a Minister Earns Non-Minister Wages

Question

A church has recently hired a minister who will also work 5-10 hours each week as the church's custodian. Are all of the minister's wages exempt from FICA? Are there any issues the church should consider when issuing the minister his W-2? 

Answer

The church must understand that the minister is exempt from FICA taxes only for wages he earns performing ministerial duties. 

A review of the definition of a minister is helpful. The Internal Revenue Service's Minister Audit Technique Guide states the following:

Treas. Reg. 1.1402(c)-5(b)(2) provides that service performed by a minister in the exercise of the ministry includes:
  • Ministration of sacerdotal functions;
  • Conduct of religious worship;
  • Control, conduct, and maintenance of religious organizations (including the religious boards, societies, and other integral agencies of such organizations), under the authority of a religious body consulting a church or denomination.
If the minister performs other duties for the church that are outside of ministerial duties, he should be compensated as a non-minister. Therefore, FICA taxes should be withheld from his earnings as a custodian. 

For bookkeeping sake, it may be easier for the church to issue two separate checks to the minister each pay period. One check would report the custodian earnings (with FICA taxes withheld) and the other check would report the ministerial earnings. 

When issuing the minister's W-2, the church could either issue one W-2 or issue two W-2s. If the church issues one W-2, Box 3 and Box 5 should only report the total amount of custodian earnings.

From a tax preparation perspective, two From W-2s would be preferred. 

Comments

Popular posts from this blog

Review: Form 1099 Payments to 501(c)(3) Organizations

Question: A church rented space from another church last year. Should it request a completed Form W-9 and issue Form 1099-MISC? Answer: Payments from one 501(c)(3) organization to another 501(c)(3) organization are not subject to Form 1099-MISC reporting. The IRS Instructions for Form 1099-MISC state that "payments to a tax-exempt organization" are exempt from reporting a Form 1099-MISC.  The following are typical examples of payments of $600 or more by a church which are subject to reporting a Form 1099-MISC: Rent paid to an individual (non-corporation) Payments for services rendered by individuals who are not employees (e.g. janitorial service, facilities, snow removal, guest speakers) Support sent directly to missionaries

Special Topic: U.S. Olympic Champion Ben Peterson's Autobiography "Road to Gold"

Road to Gold , by Ben Peterson We are privileged to serve our client Ben Peterson and Camp of Champs, the wrestling ministry he founded   and directs. Ben wrestled for more than 16 years, coached on a collegiate level for 28  years, and has directed Camp of Champs for more than 40 years. We have read his autobiography and found Ben's dedication to the sport and his faith to be inspiring. If you are looking for a good story we highly recommend Ben's  Road to Gold. In Road to Gold , Ben shares the lessons he learned throughout his upbringing and how they led him to achieve Olympic victory. Ben states a key element of his youth was the consistency of his parents. He was encouraged to read the Bible every day from an early age, which he now describes as the most stabilizing habit in his life. Throughout his story Ben also emphasizes the importance of confidence, solid goals, hard work, and consistency. These qualities helped Ben throughout his life and wrestling career, from learni

When you don't know what you don't know

Here at MinistryCPA, we recognize that many churches rely on volunteers and/or part-time treasurers and financial secretaries.  With this in mind, we seek to come alongside ministries in providing the much-needed support to ensure that they are operating in a manner that is both compliant with governing authorities and taking advantage of opportunities for improved stewardship of ministry and employer financial resources.  Please consider this brief checklist to determine if your ministry needs to look further into areas that could be classified as “We don’t know if we are compliant.” Please check all compliance requirements that are currently being met: File quarterly Form 941 or annual Form 944 with the IRS Issue Forms W-2 to all employees and File Forms W-2/ W-3 with SSA Ministerial Housing Allowance is only listed in box 14 of the Form W-2 – it is not included in box 1 Obtain Form W-9 from all individuals/businesses that are paid the cumulative total of $600 or more in the year f