The Tax Court issues an important decision—Greene v. Commissioner, T.C. Memo. 1996-531 (1996) [Clergy Status-Employee or Self-employed]

Article summary. Ministers have a "dual" tax status. For social security purposes they always are self-employed with respect to services performed in the exercise of ministry. However, for federal income tax reporting purposes most ministers are employees. There are exceptions to this rule, as a recent decision by the Tax Court illustrates. The Court ruled that an Assemblies of God foreign missionary was self-employed for income tax reporting purposes. The Court's decision will be a helpful precedent not just to foreign missionaries, but to pastoral ministers as well. The Court's ruling is fully analyzed in this feature article.

Are ministers employees or self-employed for federal income tax reporting purposes? This is an important question. In fact, the "audit guidelines for ministers" released by the IRS in 1995 inform agents that "the first issue that must be determined is whether the minister is an employee or an independent contractor." A recent Tax Court decision provides useful guidance in resolving this important issue. The Tax Court ruled that an Assemblies of God foreign missionary was self-employed rather than an employee for federal income tax reporting purposes. The Court's conclusion and analysis will be helpful to other missionaries and pastors in evaluating their own tax reporting status. This feature article will review the facts of the case, summarize the court's ruling, and evaluate the significance of the case to other missionaries and pastors.