As the deadline for 2009 tax
returns approaches (April 15, 2010), it is important to review some basic tax
information for those persons who are considered “ministers for tax
purposes.” First, be sure your filing status is correct. Most ministers
have a dual tax status.
In almost every case
ministers are employees for federal and state taxes; therefore, they should
receive a W-2 from the employing church, not a 1099. In addition, ministers are
always self-employed for social security and medicare purposes for ministerial
income; therefore, they pay the full SECA tax of 15.3 percent. The church
should not withhold and send in Social Security taxes to the Internal Revenue
Secondly, the employing
church should always count business expense allowances as taxable
income. For example, a car allowance, book/tape/periodical allowance,
convention/workshop allowance, etc. are reported in Box 1 of the W-2 as taxable
It is only when the church
has established and administers an accountable business expense reimbursement
arrangement that these monies have no taxable consequence. Otherwise that money
If any of the business
expense funds are given as salary to the minister, even in an accountable plan,
then all of those reimbursements become taxable. The standard mileage
reimbursement rate for 2009 was 55 cents per mile. That amount has decreased to
50 cents per mile in 2010.
Third, be sure to claim the
legal amount for housing allowance. The law states that the minister must
claim the least of the following as the housing allowance for the year:
- the amount designated in
advance (this may never be done retroactively) as a housing allowance by the
- the amount actually spent
for housing costs during the year;
the fair rental value of the
home furnished with utilities.
For those who live in a
parsonage and have housing expenses the person must claim the lesser of the
the amount designated in advance
by the church;
the amount actually spent
for housing costs during the year.
Furthermore, these amounts
are only exempt from federal/state taxes; the minister must pay SECA taxes on
the housing allowance and/or the fair rental value of the parsonage.
Fourth, be sure to gather
and organize all tax documents including receipts for appropriate and correct
reporting purposes as you prepare your tax returns or pay an official tax
preparer. Be advised in securing a tax preparer that the person whom you enlist
understands ministers’ taxes since minister tax status is very different from
the ordinary citizen/tax payer.
Fifth, be sure to include
your social security number, sign and date your returns, and mail them to the
appropriate Internal Revenue Service address by the tax deadline. The IRS has
indicated that these are very common mistakes/oversights.
For additional information
and a step-by-step explanation of preparing your 2009 tax returns an excellent
resource piece by Richard Hammar, 2009 Ministers Tax Guide, is now posted on
the GuideStone Financial Resources web site.