Pastor makes request for withholdings

by Michael
(Prichard, AL USA)

So after the pastor makes the request for withholdings, does the church just write him or her the check quarterly or send it to the IRS with some special forms?

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Comments for Pastor makes request for withholdings

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Complete and Sign W-4
by: Vickey

A minister can request voluntary withholdings at any time.

Just have them complete and sign a W-4. advise them that they may want to put enough in "extra" withholding (line 6) to cover their SE taxes.
When can the Pastor request withholdings
by: Anonymous

When can a Pastor voluntarily request withholdings? Can it be done at anytime or must it be done at the beginning of the year?
Have Your Minister Complete a W-4
by: Vickey

JT, I would require the minister to complete and sign a W-4. They don't have to put anything in Line 6; however, I always encourage the minister to figure how much more they are going to owe on the SE tax and enter it on line 6.

StartChurch has a wonderful tool for ministers on their site that helps with determining how much to enter on that W-4:

https://www.startchurch.com/app/withholdings-calculator
Pastor's W-4
by: JT

As a dual employee, are pastors required to fill out a W-4? If so, does that suffice as a request to withhold income tax or do they also need to specifically request an amount (an actual dollar amount on line 6 or elsewhere in writing)?

From reading the book, it seems that no withholding is taken from salary unless specifically requested.

Also, if the pastor has made it known verbally (and documented in church meeting minutes) that they would like withholding to take place, is this sufficient documentation or do we also need the request directly from the pastor in writing?
Ministers Voluntary Withholding
by: Vickey

Is the church allowed to withhold and submit taxes on Housing Allowance if the pastor requests withholding on Housing Allowance?

No, you can not withhold anything on his housing allowance; however, he can request voluntary withholding on his income taxes (on his regular wages only) and he can specify the amount he wants withheld.

So even though it will be income taxes withheld the extra amount could help offset the self employment tax on his regular wages and housing allowance.

Gets overwhelming sometimes, doesn't it :-)

I have 3 jobs...but no kids living at home at the time...that would be hard. When my grandkids are at my house I can't get anything done :-)
This is making sense now
by: Anonymous

Thanks everyone for your posts on this topic.

Pastor withholding is such a complex issue for a 1st time church treasurer with 2 kids and 2 jobs!

Final question: Is the church allowed to withhold and submit taxes on Housing Allowance if the pastor requests withholding on Housing Allowance?
941
by: Anonymous

According to IRS, in most cases a minister is considered an employee for income tax purposes, but self-employed for social security tax purposes. Therefore ministers pay the SECA, not the FICA tax.

As was stated in an earlier post, a church cannot withhold SECA tax. However, at the ministers request, the church may withhold addtional income tax to cover his self-employment tax (SECA) obligation. The church then deposits this amount with any other payroll taxes due monthly and reports it on the 941 form .

This method is purely for the minister's convenience since it precludes him having to pay his personal self-employment taxes quarterly. (alternatively, the church may just write the minister a check each quarter for the additional amount witheld so that he can pay his self-employment tax himself (Note the church itself must still pay any income tax witheld against the ministers salary as an employee).

The church then issues him a W-2 at the the end of the year properly filled out (not a 1099), and the only personal return he files is the annual 1040 form, usually along with Schedule C and Schedule SE on which he reports self-employment income (which is generally all income including housing).

If a church and minister choose this method of withholding, it definitely changes the way the 941 form is filled out.
Voluntary Income tax Withholding
by: Vickey

A church can withhold income tax, but not Social Security and Medicare tax.

Ministers who report their income taxes as an employee can request voluntary withholding by submitting a Form W-4 to the church.
To withhold, or not to withhold, that is the question
by: Anonymous

Our minister provided a w-4 requesting withholding. Therefore, we withhold, right?
No FICA withheld for ministers
by: Vickey

Three federal taxes are paid on wages and self-employment income—income tax, social security tax, and Medicare tax. Social security and Medicare taxes are collected under one of two systems. Under the Self-Employment Contributions Act (SECA), the self-employed person pays all the taxes. Under the Federal Insurance Contributions Act (FICA), the employee and the employer each pay half of the taxes.

Ministers are under the SECA system. See IRS Publication 517:

http://www.irs.gov/publications/p517/ar01.html

Therefore the church would not hold out Medicare and Social security taxes out on a minister.

To the person who asked about withholding on a housing allowance...you cannot withhold any taxes from a minister’s housing allowance payment. They will need to pay the self-employment tax owed on it by sending in estimated tax payments...but they are responsible for that...not the church.
Soc Sec and Medicare Withholding request
by: Anonymous

Our pastor requested that the church withhold Soc Sec and Medicare from his Housing Allowance. I have been reading up on this but the more I read, the most confused I get. How would one handle, report, and pay this?
Confused
by: Anonymous

I'm confused. If you are withholding for the minister, why would you not withhold Social Security and Medicare and report that on the 941?
Checking box on line 4 on 941
by: Vickey

Yes!!!!

Thank you for mentioning that very important step. Always make sure you check that box on line 4 when you are filing a form 941 for a minister [ONLY]. If you are filing for a minister and non minister employees...don't check that box! Simply put all wages/salaries on line 2 and ONLY nonminister wages/salaries totals in line 5.
941 Ministerial Withholding
by: Anonymous

I agree that ministerial withholdings are filed on form 941. I am a private accountant for our church and process our church's payroll taxes and the minister has withholdings that are filed on form 941 for federal and on the state withholding form for the state.

However, I always check box #4 (If no wages, tips, and other compensation are subject to social security or Medicare tax)because [ministers] (whether or not they have opted out of Social Security and Medicare) do not pay Social Security and Medicare tax through form 941 nor do churches as long as they are 501c3 or non-profit organizations.

As long as the withholdings are less than $2500 for the quarter, you can also pay these amounts with the 941 return form with the Form 941-V payment voucher.
Income Tax Withholdings
by: Vickey

You will submit his income tax withholdings along with an IRS Form 941 (Employer’s QUARTERLY Federal Tax Return) to the IRS.

See this page form step-by-step instructions on completing and filing a 941:

IRS Form 941 Guide

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