Why do pastors pay taxes?

According to the IRS, a licensed, commissioned, or ordained minister is generally treated as a common law employee

of his or her church, denomination, or sect. This means that, as a common law employee of your church, you are entitled to Social Security Exemption. There may be exceptions, however, and this is why it is important to contact a qualified tax professional who specializes in clergy-related tax returns.

What if I’m a traveling minister?

The IRS may have exceptions for you. Contact us for more information about clergy taxes.

We are a church and outreach mission in the urban core of Kansas City, KS.  We recently hired a new pastor who has been ordained for over 25 years and had previously filed a Form 4361 to be exempt from Social Security & Medicare taxes.  Are we, as the church required to keep a copy of his 4361 on file, or does the burden of proof fall to the pastor when he files his taxes?

The “burden of proof” falls upon the pastor.  IF the IRS ever comes looking for the approved Form 4361, it would be up to the pastor to “prove his innocence,” so-to-speak, by showing the IRS a copy of approved Form 4361.   As a tax return preparer, I do not have to have a copy of the approved Form 4361 either but I always ask for a copy to keep

here.  There have been times when a client of mine calls in a panic because he could not find his approved Form 4361 and I look like a hero because I have one in his file.  🙂   The church does not NEED to have one, but it is nice to keep a copy of the approved Form 4361 with the pastor’s personnel or payroll files.  If the pastor can not produce a copy for you, there is no need to worry.  It is the pastor who will have to deal with the IRS about the self-employment taxes.  Remember, a pastor is considered an employee for INCOME tax reasons, but he is considered self-employed for Social Security tax reasons.  That dual status of ministers and pastors is the reason why pastor’s taxes are different from everyone else.

Thanks again for contacting me.  Please let me know if have further questions or concerns.

What kinds of taxes am I expected to pay?

Income Tax For Ministers may be the same as for when you are self-employed; however, that is not always the case. For example, Medicare and retirement taxes are considered to be taxed at the same rate as those of the common law employee. There may be other exceptions to ministerial taxes.

What is an enroll agent?

An Enrolled Agent (EA) is a federally-authorized tax practitioner who has technical expertise in the field of taxation and who is empowered by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the Internal Revenue Service for audits, collections, and appeals. The license is earned in one of two ways, by passing a comprehensive examination which covers all aspects of the tax code or having worked at the IRS for five years in a position which regularly interpreted and applied the tax code and its regulations.

I use my personal vehicle for ministry business. Does this make my vehicle or any repairs a business expense?

While you may use your personal vehicle for ministry business if it is owned by you, no repairs or payments can be considered a business expense. However, any mileage that you accrue throughout the year can be deducted from your income and should be reimbursed by the ministry.


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