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Continuing education for ministry leaders
Weekly Lessons, created and written by Richard R. Hammar, J.D., LL.M., CPA, give you a basic legal overview of essential topics based on staff or volunteer positions within a church.

Previous Lessons

Week of February 23

Gifts of Stock - Part 2

This Week's LessonWeek of November 25

Withholding Taxes from Ministers

Introduction

Pastor J is senior pastor of his church. He is paid a salary and a housing allowance. The church has three non-minister employees. The church treasurer withholds income taxes as well as Social Security and Medicare taxes from the wages of the three non-minister employees. She assumes that she must do the same for Pastor J. Is she correct? This question is addressed in this week's lesson.

Our lesson this week examines the topic of withholding taxes of ministerial employees. The Executive Summary provides a concise review of the key points. Before we get started, test your knowledge by completing the following quiz.

Weekly Quiz

Instructions Click on the correct answer for each of the following questions.

***Insert quiz here***

Executive Summary

Ministers are exempt from federal tax withholding, whether they report their income taxes as an employee or as self-employed. However, if they report their income taxes as an employee, they may request "voluntary withholding" of their income taxes and self-employment taxes by filing a Form W-4 with the church. A self-employed minister is free to enter into an "unofficial" withholding arrangement whereby the church withholds a portion of his or her compensation each week and deposits it in a church account, and then distributes the balance to the minister in advance of each quarterly estimated tax payment due date.

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