Much of the confusion around clergy taxes stems from the dual tax status that is unique to clergy. While most clergy are considered employees for federal income tax reporting purposes, all clergy are self-employed for Social Security and Medicare tax purposes with respect to services performed in the exercise of ministry.
- Your earnings are reported on a Form W-2, not on a Form 1099.
- You are responsible to pay both federal income taxes and self-employment taxes for Social Security and Medicare (SECA) through quarterly estimated tax payments.
You may voluntarily elect to have your employer withhold income taxes from your wages by submitting a completed Form W-4 Withholding Allowance Certificate to your employer.
- — Since you are not an employee for Social Security and Medicare tax purposes, your employer will not withhold your share of Social Security and Medicare taxes as is done for secular jobs.
- — On Form W-4, you can request additional income tax withholding to cover your self-employment tax liability for the year. The excess income tax withheld is a credit that can be applied against your self-employment tax liability.
- SECA taxes are computed on Schedule SE and reported with your federal income tax return.
Federal Taxable Income
As clergy, the portion of your wages that have been identified as clergy housing allowance (as per IRS regulations) is exempt from federal income taxes.
Self-employment (SECA) Tax
For SECA, all income subject to federal income tax plus the IRS allowable clergy housing allowance and utilities paid by your employer minus unreimbursed business expenses are taxed.
What if I have questions about clergy taxes?
There are several resources that you can use:
Tax resources by Richard R. Hammar, J.D., LL.M., CPA:
CPG’s Tax Hotline consultants
- — Ms. Nancy N. Fritschner, CPA . . . . . . . . . . . . . . . . . . . . (877) 305-1414
- — The Rev. Canon Bill Geisler, CPA (ret.). . . . . . . . . . . . . . (877) 305-1415
Tips & Resources - Clergy Taxes
Remind your treasurer that the total amount of federal withholdings should be reported to the IRS as income tax, and none of it should be reported as Social Security or Medicare tax withheld.
If you use a tax preparer, give them an updated copy of the CPG Tax Guide for Episcopal Ministers.
Let your tax preparers know about the clergy tax hotline.
This material is for informational purposes only and is not intended as investment, tax, financial, legal or other advice. Your personal decisions should be based on the recommendations of your own professional advisors.
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