Filling out and submitting a Form W-4, the Employee’s Withholding Allowance Certificate, enables your church to withhold the correct amount of federal income tax for non-clergy compensation. Using the form, you calculate the number of allowances that you can claim on your taxes by totaling your dependents, deductions, and adjustments to withholding.
Calculating the correct number of allowances will ensure that your church will not withhold too much or too little for federal taxes. The more withholding allowances you have, the smaller the amount of federal taxes withheld from your wages. Having too many allowances may cause a significant tax bill due when you file your tax return. On the other hand, having too few allowances may provide a refund.
The W-4 worksheet in the IRS instructions is only designed for non-clergy employees and should not be used to determine voluntary withholding for clergy.
By default, clergy are subject to estimated tax payments on a quarterly basis which include federal, social security and state taxes. For example, when you receive clergy income in the first quarter of the year, the taxes are due at the end of that quarter. The year is divided into four payment periods, or due dates, for estimated tax purposes which are listed below.
Payment 1 – April 15th (January through March)
Payment 2 – June 15th (April through June)
Payment 3 – September 15th (July through September)
Payment 4 – January 15th (October through December)
Clergy can also elect to have income taxes withheld from their compensation by means of voluntary withholding agreements which may simplify the budgeting.
Caution – Standard W-4 withholdings will only cover your federal and state taxes and does not address SECA withholdings. We recommend discussing voluntary withholding agreements with a tax advisor at Clergy Financial Resources.
Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
For more information or if you need additional assistance, please use the contact information below.
Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369
Tel: (763) 425-8778
Fax: (888) 876-5101