Key point 1-03.02. Most 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 Tax Court.
The question of whether a minister is an employee or self-employed for federal income tax reporting purposes is an important one. The IRS thinks so too, for its audit guidelines for ministers state that "the first issue that must be determined is whether the minister is an employee or an independent contractor." Why is this distinction so important? Consider the following reasons: