Q: Should a church with no nonminister employees and only one minister file the quarterly 941 form (Employer’s Quarterly Federal Tax Return)?
What Is Form 941?
Form 941 reports the number of employees, the amount of Social Security and Medicare taxes, and withheld income taxes that are payable. Line 4 of the form contains a checkbox to indicate whether wages and other compensation are not subject to Social Security or Medicare tax. Churches that have filed a timely Form 8274 with the IRS, exempting them from the employer’s share of these taxes, should check this box.
Reporting Clergy Wages
- Line 2: Wages of ministers who report their income taxes as employees are included here, along with nonminister employees’ wages. Do not include a minister’s housing allowance, as it will not be reported on the Form W-2 issued to the minister.
- Line 3: Ministers’ wages are exempt from tax withholding unless they elect voluntary withholding. If no election is made, no amount is entered here.
- Lines 5a through 5d: Ministers do not pay the employee’s share of Social Security or Medicare taxes, and their employing church does not pay the employer’s share. Instead, ministers pay the self-employment tax, so these lines remain blank.
Do Churches with One Employee Need to File Form 941?
For churches with only one employee (the minister), filing requirements depend on whether wages are subject to income tax withholding:
- If the minister’s wages are not subject to withholding and there are no nonminister employees, Form 941 is not required.
- If the minister has elected voluntary income tax withholding, Form 941 must be filed to report those withholdings.
- If the church employs nonminister employees, it must file Form 941 to report their wages and withholdings.
IRS Regulations
According to IRS Regulation 31.6011(a)-4(a)(1), only employers required to withhold income taxes under Section 3402 of the tax code need to file Form 941. Section 3401(a)(9) excludes compensation paid for “services performed by a duly ordained, commissioned, or licensed minister of a church” from income tax withholding, meaning the church is not required to file Form 941 if the minister is the sole employee.
Instructions for Form 941
The instructions state, “File your initial Form 941 for the quarter in which you first paid wages that are subject to Social Security and Medicare taxes or subject to federal income tax withholding.” If a church has only one employee (its minister), who has not elected voluntary withholding, it is not required to file Form 941.
Additional Considerations
- If a church employs multiple ministers but no nonminister employees, Form 941 is still not required.
- Issuing a Form W-2 to a minister without filing quarterly Forms 941 may trigger an IRS inquiry. This apparent discrepancy can be explained by the exemption of ministerial wages from withholding.
- Form 941 is due on the last day of the month following the end of each calendar quarter.
FAQs About Using Form 941
What happens if a church files Form 941 incorrectly? Errors on Form 941 can trigger IRS inquiries or penalties. Ensure accuracy by consulting IRS instructions or a qualified tax professional. Can a church with no nonminister employees skip Form 941? Yes, if the minister’s wages are exempt from withholding and no nonminister employees are on staff, Form 941 is not required. What if a minister elects voluntary tax withholding? In this case, the church must file Form 941 to report the voluntary withholdings. Where can churches get help with Form 941? Call the IRS toll-free at 1-800-829-4933 for assistance with Form 941, tax deposit rules, or obtaining an EIN.
Conclusion
Understanding when and how to use Form 941 is crucial for churches to comply with IRS regulations. Churches with no nonminister employees and only one minister are generally exempt from filing, but exceptions apply when voluntary withholding is elected or nonminister employees are on staff. For further guidance, consult a tax professional or the IRS directly.
