Are Church Custodians Employees or Self-Employed?
An IRS ruling provides helpful guidance.

IRS Private Letter Ruling 9830008

Background. Every church has one or more custodians, and it is important for church treasurers to properly classify these workers as employees or self-employed. There are many reasons why this task is important, including the following:

W-2 or 1099? Churches issue a W-2 to employees at the end of the year reporting wages paid and taxes withheld. Churches issue a 1099 form to self-employed persons who are paid at least $600 during the year.

941 forms. Churches that are subject to income tax withholding, social security taxes, or both, must file Form 941 quarterly. No entries are made for self-employed workers, since they are not subject to tax withholding and they do not pay social security or Medicare taxes (they pay the self-employment tax).

Tax withholding. Churches must withhold federal income taxes and the employee's share of social security and Medicare taxes from the wages of most nonminister employees. Self-employed workers are not subject to federal tax withholding (other than "backup withholding," which applies if a self-employed worker fails to provide an employer with a social security number).

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Posted: September 1, 1998
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