Pastors Tax Basics: Filing 2012 Taxes

If you are a pastor, then it’s a good idea to start considering tax preparation for your 2012 taxes. Pastors are faced with confusing rules when it comes to their tax status and how and when to pay their taxes. The U.S. government allows pastors to be considered as both employees and self-employed depending on a pastor’s individual situation. For this reason, pastors taxes must be planned carefully and discussed with a professional.

Here are some pastors tax basics if you’ve already begun getting your 2012 taxes together.

Tax Status

Due to the fact that pastors can be classified as both a church employee or self-employed, pastors taxes can be quite confusing. When reporting income tax pastors are seen as employees of their church and the church can decide whether or not to withhold tax from the pastor’s pay. When it comes to Social Security and Medicare, pastors are classified as self-employed and under federal tax law, churches cannot withhold FICA and Medicare taxes, and no taxes are reported on the pastor’s W-2 form at the end of the tax year.

Income Included

On a federal income tax return, a pastor pays tax on only the amount of salary paid by the church which doesn’t include expenses like housing or other fringe benefits. If you are a pastor you do need to pay close attention to self-employment taxes. A pastor must pay self-employment taxes not only on their salary but also on their housing allowance and fair-market value for rental of a church parsonage.

Tax Payments

There are quite a few tax payments for pastors to manage including federal income taxes and self-employment taxes. Pastors can request that their church withhold federal income tax from regular pay and self-employment taxes can be paid quarterly on estimated earned income. Quarterly tax payments are only an estimation so any remaining balances must be paid when filing an annual tax return. State tax payments can also be paid quarterly.

If you have any questions about filing your 2012 pastors taxes, contact the Pastor’s Tax Man at Daknis Tax Service.

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Sarah Wozniak

Staff Writer, Page1 Online Marketing