Skip to main content

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 who have less than $1,000 of withholding taxes to report during the year (only if granted permission by the IRS through correspondence). Once the employer has more than $1,000 to report, the employer must file the quarterly Form 941.
  • Regardless, if the church has non-ministerial employees or has non-mandatory withholding from its minister(s) it must file either Form 941 or, if approved, Form 944.
Here is an excerpt from the Instructions for Form 944: 

Who Must File Form 944?

In general, if the IRS has notified you to file Form 944, you must file Form 944 instead of Forms 941 to report the following amounts. 
  • Wages you have paid 
  • Federal income tax you withheld 
  • Both the employer's and the employee's share of social security and Medicare taxes 
  • Additional Medicare Tax withheld from employees 
  • Current year's adjustments to social security and Medicare taxes for fractions of cents, sick pay, tips, and group-term life insurance
If you received notification to file Form 944, you must file Form 944 to report your social security, Medicare, and withheld federal income taxes for the calendar year unless you contact the IRS between January 1 and April 1 of the calendar year. 



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

Rental of a Church Parsonage to a Non-Minister

By
Question: A church owns a parsonage, but the pastor does not use it as he owns his own home. The church rents the parsonage to a tenant other than a minister or employee of the church. Will the church be responsible for paying income tax on these monies as Unrelated Business Income (filing a Form 990-T) even if the money is used to carry on the business of the church? Answer: Whether the money is used for church purposes is irrelevant.  IRS Publication 598  states: "If an exempt organization regularly carries on a trade or business not substantially related to its exempt purpose, except that it provides funds to carry out that purpose, the organization is subject to tax on its income from that unrelated trade or business." Fortunately, in the case of rental income from real property, such income is "excluded in computing unrelated business taxable income" (Publication 598). Caution: see content below regarding debt-financed property.  However, a second concern not a...
Post a Comment
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