Why should a minister be considered an employee when reporting federal income tax? Since ministers are considered self-employed for Social Security purposes, why should they also be considered employees when it comes to income taxes?
Most ministers are considered employees for the purposes of federal income tax reporting under the tests currently used by the Internal Revenue Service and the courts. And most ministers will be better off reporting as employees, too, since: (1) the value of some fringe benefits will be nontaxable, (2) the risk of an IRS audit is substantially lower, and (3) reporting as an employee avoids the additional taxes and penalties that often apply to self-employed ministers who are audited by the IRS and reclassified as employees.
—Adapted from the 2018 Church & Clergy Tax Guide by Richard R. Hammar, available on ChurchLawAndTaxStore.com