Thursday, June 21, 2018
Hey Fletch … For a pastor that has been licensed by the Board of Elders, my assumption is that the church should not withhold any Social Security or Medicare tax, right?
DRF—This question is one of the reasons that I wrote Smart Money for Church Salaries. This book and the 12 regional workshops in the fall of 2018 get to the heart of this and other similar questions. Issues of pastoral compensation can be murky. The book looks at every salary in WheatFields Good News Church, a complied case study.
Pastors pay into the Self Employed Contributions Act (SECA). IRS Publication 517 outlines Social Security for religious workers (see U.S. Department of Treasury, Internal Revenue Service, Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers, December 29, 2017, available from https://www.irs.gov/pub/irs-pdf/p517.pdf). SECA is 15.3% of wages and go to Social Security or Medicare. Only pastors who have opted out of Social Security are exempt from paying SECA.
The church cannot pay Social Security or Medicare for the pastor! The pastor can ask the church to voluntarily withhold funds and remit them to the government for SECA. Or, the pastor can pay their own quarterly estimated taxes, which takes financial discipline.