Pastors and other ministers of the gospel are defined by federal law to be self-employed for purposes of FICA. That means they are required to make quarterly payment to the Treasury of self-employment taxes under SECA instead of FICA.
That also means churches should not be withholding FICA taxes from staff who are categorized as ministers of the gospel. Don’t blame me – that’s federal law.
What to do? Should churches correct the incorrect withholding?
Corey Pfaffe, writing at MinistryCPA, say yes in his post When a Church Incorrectly Withholds FICA from a Minister.
He gives code sections and explains the required reporting.
Other posts from Prof. Pfaffe on pastors and taxes you would do well to read:
- Refund of Incorrectly Withheld FICA Taxes from a Minister – Explains how to correct the incorrect withholding
- Church Withholding of FICA Taxes – This post makes the same recommendation I provide my clients on how to assist ministers to avoid having to make the payments themselves – check out the post
- Review of Form W-2 Reporting for Ministers
Please check out the articles. Subscribe to his blog, set it up on your RSS feed (like I’ve done), or visit his site regularly. You will be blessed by increasing your tax knowledge.
Might even make add those four posts to your Evernote files so you can find them easily, like I just did.