Clergy Tax Issues – Vol 7 of 8: How does a minister pay taxes?

Clergy Tax Issues – Vol 7 of 8: How does a minister pay taxes?


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As mentioned in an earlier blog, ministers are not required to have federal income tax withheld from each paycheck. They have the option of paying in estimated taxes quarterly via submission of a form 1040-ES with payment.

Some pastors prefer to allow the church to proceed to withhold federal income taxes with each paycheck and have the church pay it in as they do with other staff employees. Then no quarterly reporting is required.

The amount paid for the four quarters must equal at least 90% of the estimated tax liability for the current year or the pastor risks penalties and interest.  However, a pastor who pays in estimated taxes equivalent to 100% of the prior year will not be penalized even if that amount is less than 90% of the current year taxes.


Additionally, remember that even though clergy are only paying federal income tax on the box 1 salary, they are paying SECA taxes on the salary + housing allowance. This can add up to a substantially greater tax liability.  So, many clergy opt to have regular FIT withholding AND request “Additional Withholding” on line 4 of their W-4 to put towards the SECA tax that will be required when filing tax form 1040 and form SE.

It is always best to seek the advice of a tax professional (CPA or EA) and even then, you should interview your prospective provider.  Ask them what they know about clergy’s dual-status taxpaying? Ask them what they know about what is included in a clergy housing allowance.  Ask them if you can be paid 1099? If their answers are not comprehensive and/or forthcoming, keep looking for a tax preparer. CPA’s are like doctors, they all have their specialties.


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Please see Clergy Tax related blogs here.