Tax Preparation for Missionaries

Serving God and spreading the Good News often requires going outside of your comfort zone and even overseas in order to spread the Word. If God is leading you to teach the masses as a missionary, it’s necessary to consider everything that being a missionary entails which also includes proper tax preparation.

According to IRS Tax services, missionaries fall under the definition of ministers. Ministers and missionaries both are people that are considered ordained by a licensed religious group to conduct religious worship, administer ordinances and follow a church’s prescribed system of beliefs. Therefore a missionary is responsible for filling out the proper clergy tax paperwork that explains his or her tax status.  Keep these aspects in mind when preparing your taxes as a missionary.

Self Employed Exemption

IRS considers missionaries as self employed workers. They can exempt themselves from this status, however, by filling out a form 4361. On this form missionaries can describe their position and provide other legal information.

IRS Publication 517

This form is especially important for foreign missionaries to consider. It’s the starting point for filing taxes as a missionary by providing details and examples of how missionaries should prepare their federal income taxes. It also includes guidelines on figuring income, foreign income aid, and housing expenses, but doesn’t really address tax liability.

Residency

If a missionary serves in a foreign country, the type and amount of tax depends on if they are considered a resident of that country. To be considered a resident of a foreign country, missionaries must have lived there for an entire year. If they live and work in a foreign country they are usually a candidate for tax exclusion in the US. If they aren’t serving overseas for at least a year, then they are still expected to pay US income taxes.

IRS Publication 54

Missionaries serving God overseas should check out IRS Publication54 which discusses who can qualify for foreign earned income exclusions. If the missionary earns less than $94,000 (this is for the 2009 tax year) then they qualify for an exemption. This amount includes all income a missionary may receive including money, goods, property, housing, etc.

When called to spread the Word around the world, clergy tax may be the last thing that you want to have to think about. But it’s a good idea to have a full understanding of tax responsibilities before leaving the US.

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