Ministers—especially new ones—often fail to file income tax returns. It's a common problem, because churches are not required to withhold either income taxes or Social Security taxes from the wages of ministers who are performing ministerial services. This occurrence takes place for two main reasons:
- Ministers are classified as self-employed by the tax code for Social Security purposes (they pay the self-employment tax in lieu of having Social Security and Medicare taxes withheld from their wages by their employing church), and
- The tax code exempts the wages of ministers from income tax withholding.
Unless they elect voluntary tax withholding, ministers are required to prepay their federal income taxes and self-employment taxes using the estimated tax procedure. This requires the minister to estimate his or her income taxes and self-employment taxes for the year and pay one-fourth ...