how does a pastor file that does NOT receive any salary?

by Kathy Butler
(Corning, AR)

Church Accounting Package

Our pastor has elected NOT to receive any type of payroll salary. The church has a rent house he lives in. The church pays the rent and all the utilities.

The church gives pastor love gifts through out the year, B-day, Christmas, Pastor appreciation Sunday. He also receives a $500 love gift every 10 weeks.

The church has elected to give him $100.00 a week that is designated as a housing allowance. So the income he receives in the form of checks are the love gifts and the weekly housing allowance. I know that he is to pay 15.3% on all of that which I have listed.

For federal income tax purposes his only income would be his social security and retirement checks he receives monthly. Is that correct?

I know he is has a dual status with federal income tax: his social security and retirement checks, and Self Employment taxed on income from love gifts and housing allowance. He would like to pay his SE tax quarterly in stead of lump sum with his income tax.

As the church, how would we report his love gifts in order to get the correct amount to send in quarterly?

Is there a form to file with the IRS to do this?

As a small membered church we do not have to file a 990 or 941 or any kind of income tax, and we do not have any employees no one is salaried. What the church pays out is what I said earlier. Just the love gifts and housing allowance, and we pay all rent and utilities.

We want to keep everything legal. He wants to pay what is due to be paid. I as the church secretary/treasurer need to know what paperwork I give to the pastor that he will need to file his taxes correctly. They have already been filed this 2009 tax year. Any help will be appreciated.

Vickey's Reply

I admire your diligence in assuring you are filing the correct forms and handling your Pastor's compensation correctly. Please consider purchasing the Church Accounting Package to ensure you are on the right track:)

Regarding your questions:

1. For federal income tax purposes his only income would be his social security and retirement checks he receives monthly. Is that correct?

Not quite. He would have to pay income and SE tax on the love gifts and offerings too.

2. He would like to pay his SE tax quarterly in stead of lump sum with his income tax.

Yes. He can make estimated tax payments quarterly to cover his SE tax and his income tax. See this page for more information on filing 1040ES.

3. As the church, how would we report his love gifts in order to get the correct amount to send in quarterly? Is there a form to file with the IRS to do this?

In January, you will need to prepare a W-2 or 1099 to report his love offerings to the IRS and the Social Security Administration. Which one depends on if your pastor is considered an employee of the church or not. Look up your state and federal labor laws to make this determination.

If you determine he is an employee,you will also need to start filing quarterly 941 forms. See this page for more information: Payroll Tax Forms: 941

Note: MOST of the time, pastors are considered employees of their churches.