Article summary. There are a number of errors that frequently appear on ministers' tax returns. These errors may be more common for ministers who prepare their own tax returns, but they also are often seen on returns prepared by professional tax preparers. This article will describe several of these common errors, and show how to handle ministers' taxes correctly.
The preparation of ministers' tax returns presents a number of challenging issues that often are not well understood. This can lead to innocent mistakes, which in turn can lead to unexpected additional taxes in the event of an audit. Let's review some of the mistakes that occur frequently. Ministers who understand these common errors are better equipped to prepare their own returns.
Error No. 1: Reporting Social Security taxes as an employee
Most ministers report their federal income taxes as employees. Many of these ministers naturally assume that they should report their Social Security taxes as employees too. Unfortunately, the tax law is not always logical. Ministers are always self-employed for Social Security with respect to services performed in the exercise of their ministry, even if they report their income taxes as an employee. This is sometimes called the "dual tax status" of ministers.