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Two Confusing Tax-Filing Issues

Simple answers to vexing questions for new—and veteran—ministers.

Following are two of the most perplexing tax questions for clergy. While there are many more we could cover, these are two that pose confusion and uncertainty for many ministers, new and seasoned.

1. Should a minister report income taxes as an employee or as self-employed?

Many ministers wonder whether they should report their federal income taxes as an employee or as self-employed. Most new ministers should report their federal income taxes as employees, because they will be considered employees under the tests currently used by the IRS and the courts. Most clergy will be "better off" reporting as employees, since (1) the value of various fringe benefits will be excludable, including the cost of employer-paid health insurance premiums on the life of the minister, (2) the risk of an IRS audit is substantially lower, and (3) reporting as an employee avoids the additional taxes and ...

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Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

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Posted:
  • January 1, 2013

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