Wednesday, July 4, 2018
Hey Fletch … I’m new to working in a church and think that our business office got my taxes wrong. They said that federal law requires the church, as the employer, to take out withholding and Social Security taxes. Is this right?
DRF—Congratulations on your first ministry position! That is so exciting. What a great time of life.
As to your business office, how do I say in a nice way, “they totally got it wrong … for pastors.” Their statement is true only for non-pastors. For non-pastors the church is required to take out federal income tax and FICA (which is 6.2% Social Security and 1.45% Medicare of gross wages).
Pastors for income tax purposes are self-employed and the church cannot take out income tax or SECA (the self-employed version of FICA). Pastors must pay estimated taxes. To pay estimated tax, the pastor can pay quarterly on April 15, June 15, September 15 and January 15. The pastor can also ask the church to sent in funds to the government from each paycheck. This is a voluntary act by both the pastor and the church—the church could refuse to do so.
Come to the workshop on Smart Money for Church Salaries to learn more!