Payroll, Taxes and Reporting
Below is information to assist local churches in properly following both Federal and State tax laws and payroll reporting requirements for their clergy and lay employees:
- Employee or Independent Contractor*
- Employers Quarterly Federal Tax Return (Form 941) Filing Instructions
- New York State Withholding Tax Filing Requirements (Form NYS-45)
- GCFA Tax Packet (includes information on clergy taxes, housing allowances, reimbursements, Form W-2s, etc.)
- GCFA Group Ruling Request
- IRS Ministers Audit Techniques Guide
- NYS New Hire Reporting Requirements
- NYS Wage Theft Prevention Act and required Notice of Pay Rate
- NYS Wage Withholding and Quarterly Filing Instructions (Form 45)
- W-2 Form - Example for clergy
- W-2 Form - Sample for clergy
- W-2 Form - IRS Reporting Responsibilities for Employers
- W-3 Form - Transmittal of Wage and Tax Statements - Reporting Requirement
*Important: Misclassification of employees as independent contractors, or as exempt employees who should be non-exempt can result in liability, including but not limited to minimum wage and overtime violations, unemployment insurance contributions, workers' compensation coverage, and unpaid employment taxes.
Should Local Churches provide their pastor with a Form W-2 or Form 1099?
IRS.gov states: For services in the exercise of the ministry, members of the clergy receive a Form W-2 but do not have social security or Medicare taxes withheld. They must pay social security and Medicare by filing Form 1040 (Schedule SE), Self-Employment Tax. For additional information refer to Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers.
IRS Minister Audit Technique Guide states: Payment for services as a minister, unless statutorily exempt, is subject to income tax, therefore the minister should make estimated tax payments to avoid potential penalties for not paying enough tax as the minister earns the income. If the employer and employee agree, an election can be made to have income taxes withheld. IRC § 3402(p)(3). Even though a minister may receive a Form 1099-MISC for the performance of services, he or she may be a common law employee and should in fact be receiving a Form W-2.
For additional information or questions, please contact the Benefits Ministry Area at the Conference office, (315) 898-2000.