Clergy Tax Facts
Clergy Tax Tip:
Clergy will see the benefit of this new legislation when they prepare their 2011 tax return.
Newly Enacted Tax Legislation to Affect Employers on January 1st
On December 17, 2010, President Obama signed into law H.R. 4853, the Tax Relief Unemployment Insurance Reauthorization and Job Creation Act Of 2010, which will affect every U.S. employer and several areas of payroll, tax and benefits administration in January.
Back in 2008, after the passage of the 2008 stimulus package, many taxpayers received $300 in the form of a stimulus check. In years since, that stimulus check has been morphed into the Making Work Pay credit (resulting in $400 per person).
Right now, employees pay a payroll tax, also called FICA tax, of 7.65% on their first $106,800 of income. 6.2% goes towards Social Security (OASDI) and 1.45% goes towards Medicare. After their first $106,800, you only pay the 1.45% of Medicare (there is no limit) and not the 6.2% towards Social Security. For 2011, the percentage you need to pay towards Social Security, as an employee, will be reduced by 2%. For someone earning the maximum $106,800, it’s a reduction of $2,136. After you take out taxes, based on your tax bracket, the rest goes into your pocket.
The first stimulus check gave you $300, the next one gave you up to $400, and this one has the potential of putting over two thousand dollars into your pocket over the course of the year.
Clergy are self-employed for social security and will also pay less self-employment tax. The Social Security portion of self-employment taxes has been reduced for 2011, from 12.4 percent to 10.4 percent. If you pay estimated taxes, this amount may reduced your 2011 tax liability.
If the church has only the clergy member as an employee, a 941 form need not be filed. However, if the church also has other lay employees, the clergy needs to included on the 941. The IRS matches up the W-2’s with the 941’s and will contact the church when there are discrepancies.
Those churches utilizing Clergy Financial Resources' payroll service are well positioned to seamlessly remain in compliance with these and many other provisions.
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Get a better understanding of U.S. tax laws as they relate to pastors and churches with the Church & Clergy Tax Guide |
Every church and its employees want to feel confident that their compensation plan is reasonable and fair. |
To accomplish your church's mission and vision for ministry you need to effectively manage your church's finances |
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Clergy should not view this information as a substitute for professional advice. This information is subject to change, due to administrative rulings or interpretations and or technical corrections by the IRS. If legal advice or other expert assistance is required, the services of a competent clergy tax professional person should be sought.
