Recent Developments

Issues that affect ministers and churches
Clergy - Part 2
Taxes

The IRS has been concerned for a number of years with the problem of persons reporting their income taxes as self-employed when in fact they are more properly characterized as employees. The IRS and General Accounting Office are conducting a joint study to determine whether 1099 forms (annual information returns issued to self-employed workers) may reveal workers more properly classified as employees. In particular, the IRS noted recently that the study of 1099 forms has revealed a "universe" of self-employed persons who received all of their business income (reported on Schedule C of Form 1040) from a single employer. The IRS is in the process of determining whether such a relationship is an indication of a misclassification of employees as self-employed. This is a significant issue for clergy, many of whom continue to report their federal income taxes as self-employed and who receive a 1099 form each year from their church. In many cases, all of the Schedule C earnings of such clergy is attributable to their employing church, and is reported on a single 1099 form. If the IRS study concludes that the receipt of a single 1099 form reporting self-employment income from a single source indicates that a worker is improperly reporting his or her federal income taxes as self-employed, then self-employed clergy may wish to re-evaluate their status for federal income tax reporting purposes. Further developments in this area will be reported in future issues of this newsletter. Internal Revenue Manual update MT 5(10)00-2.

Log In For Full Access

Interested in becoming a member? Learn more.

Posted: March 1, 1989
View All
from our store
2020 Church & Clergy Tax Guide

2020 Church & Clergy Tax Guide

Find comprehensive help understanding United States tax laws as they relate to pastors and churches.
12 Law & Tax Guidelines for New Ministers

12 Law & Tax Guidelines for New Ministers

Essential knowledge to ensure legal and financial clarity and integrity in ministry.
20 Finance Questions Churches Ask

20 Finance Questions Churches Ask

Richard Hammar answers relevant tax and finance questions for church leaders.

ChurchSalary

ChurchSalary

Let ChurchSalary do the work. Get personalized compensation reports for staff and pastors.