For those just starting as Clergy, you may not be familiar with how clergy taxes are paid.
The United States has a pay-as-you-go tax system. This means that the Internal Revenue Service expects you to pay your taxes throughout the year, rather than just making a lump sum payment in December.
For the majority of taxpayers who work as wage earners, this happens automatically. Most people have income tax, Social Security tax and Medicare tax automatically removed from their paychecks. The employer is responsible for handing these over to the federal government, and the employee gets credit for it on their return.
Self-employed individuals (like plumbers, carpenters or other small business owners) are treated a little differently. Because they do not have an employer or a boss, they have to make all these payments themselves. These payments are called estimated payments.
Clergy are unique because they have a “dual tax status” that falls somewhere between wage earners and self-employed individuals. They can opt to have income tax withheld by their employer, but they are 100% responsible for making estimated payments for the Social Security and Medicare taxes on their own. This is where most first-year clergy get tripped up, because they forget to make these quarterly payments and end up owing a large tax bill at the end of the year!
Estimated Payment Deadline Extended to July 15, 2020
The IRS issued Notice 2020-23 on April 9, 2020, and announced that the deadline for making estimated tax payments for the first quarter 2020, due April 15, 2020, and the second quarter 2020, due June 15, 2020, has been extended to July 15, 2020.
Where Can You Turn For Help?
Do you have additional questions? Clergy Financial Resources is here. We are available year-round to help you manage your tax obligations and find the best possible outcome for your situation
What Happens if You Don’t Pay Quarterly Tax Payments But Should?
If you did not pay enough tax throughout the year, you may incur a penalty for the underpayment. The penalty is a complicated formula; it is imposed on the amount of underpayment for the number of days it remains unpaid, starting with the first quarter’s payment.
Is this your first ministry position? Are you moving? Have you had a change in your compensation? Let us calculate your estimated payments or optional withholdings . This service will ensure that your tax liabilities are paid on time and no surprises at the end of the year. Learn more about estimated payment support.
As part of our 1040 preparation, we calculate your estimated taxes for the following year and print estimated tax coupons for you to easily make your payments. If you want to have Clergy Financial Resources prepare your tax return and estimated payments, visit our website at https://www.clergytaxnet.com/services/clergy-tax-preparation/ for more details.
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