Ep 47 ~ Tax Issues for Ministers

1. Dual tax status = EE for income tax purposes, but considered SE for FICA tax purposes
2. Minister should make ETP throughout the year to help pay for the SE taxes that will be due on their income to avoid underpayment penalties if they owe over $1,000 tax liability
3. EE vs IC     IRS link   Publication 1779 download
4. HA is exempt from Federal Income Tax, but IS subject to SECA and has limitations on the amount that can be designated
5. Business expenses must be allocated between taxable and nontaxable income (calculated on the 3 Clergy worksheets on the ministers tax return)
6. Special rules apply to retired ministers who receive any of their retirement benefits as HA 
7. Form 4361 explanation (filed within first 2 years of earning minister earnings of $400 or more) - NON revocable
8. Due to TCJA until 2025 the Misc. Itemized deduction subject to 2% AGI limitation is not allowed. However, if the minister has unreimbursed job expenses, he can subtract them from SE earnings on Worksheet 3 of the Clergy Worksheets in the minister's 1040 tax return
9. Gifts given to active ministers may actually be compensation for services rendered and therefore included as taxable income.

I hope this information is helpful to you.

xo,

Michelle

Next Steps:

Grab Your Freebies:

https://churchfinances.ck.page/6steps    biz owners

https://churchfinances.ck.page/guide   everybody

Looking for a group of like-minded people that want to keep Jesus at the center of everything they do?

 

If you’re a business owner looking for help serving your clients with excellence, check out my Mastermind program The Bookkeepers Next Level @ www.bookkeepersNextLevel.com

 

If you’re a church staff member or volunteer looking to serve your local church with excellence, check out my membership group The Bookkeepers Inner Circle @ www.bookkeepersInnerCircle.com

Schedule a Consultation:

https://churchfinances.org/consult