MinistryCPA - Corey A. Pfaffe, CPA, LLC

Question: What ideas can a church consider to control its rising health care costs? Answer: Many ministers and their employers are looking for alternative plans to control rising health care costs without neglecting those in need of medical services. Because of the Affordable Care Act (ACA) requirements, many churches have reconsidered the medical benefits it offers to employees . If the church employs a single employee—a solo minister, the ACA has one set of requirements. Generally, there is more flexibility when there is only one employee. But for churches with two or more employees who participate in medical benefits, the ACA has stringent requirements. We suggest that you consult your tax professional when offering medical benefits. The benefits the church offers may very well be 100 percent taxable to the employee. For example, be aware that if a church covers the monthly share costs of an employee for a health-sharing plan (e.g., Samaritan Ministries International, Medi...

Question: What reports do churches need to file with the IRS regarding pastors' compensation? Answer: Other than for the pastor, a church files the same reports for all employees and is subject to the same withholding rules for standard employees as any other organization. Ministers compensation, however, is exempt from all withholding. The only exemptions churches enjoy compared to other organizations are (1) an exemption from unemployment taxes, and (2) an exemption from FICA (Social Security and Medicare) tax for churches that file Form 8274 .  IRS Publication 15 can answer church treasurers’ standard questions regarding church payroll. Reporting a minster’s compensation is often confusing even to treasurers who are familiar with the rules for standard employees. The following is a sample compensation arrangement:

Your financial stewardship is too important to trust to a tax preparer (someone who only fills out tax forms) or a do-it-yourself tax software. A true tax professional views the preparation of your tax returns as a final, relatively simple step. Well before that time the professional serves you with forward-thinking strategies for your financial health. This is true whether you are a year-after-year Form W-2 employee earner or a business owner in an ever-changing financial landscape. Families whose primary sources of income are reported as Form W-2 wages have both before and after year-end tax opportunities that tax pros use to serve their clients and to offer services that more than pay for themselves. Examples: Planning ahead: Your tax professional simply reminds you that your daughter will turn 17 next year—that’s typically a $1,500 hit to your wallet. BUT when your tax pro asks and then understands that she is also starting her college education next fall, your adv...