Tax deadlines are approaching. You know what I usually hear from pastors at this time of year? Who can I use to handle my taxes? Who understands ministers’ taxes? These are good questions to ask because not every CPA or accounting firm is familiar with ministers’ pay, taxation, and their unique status.
Here are a few tips:
- If possible, stick with a CPA or tax attorney. These professionals have completed a rigorous educational program, passed a difficult qualifying examination, and are subject to a comprehensive body of professional ethics.
- Find other ministers in your community whose tax returns are prepared by professionals—and ask questions. Who do they use? Are they pleased? What is the cost? How many ministers’ tax returns does the person prepare?
- Call CPAs listed in your phone directory. Ask if they prepare ministers’ tax returns and, if so, how many they prepare.
- When you find one or more candidates, consider asking a few simple questions that should be answered easily by anyone with any experience in handling ministers’ tax returns. Here are a few examples:
(1) Are ministers employees or self-employed for Social Security purposes? Ministers are always self-employed for Social Security purposes with respect to their ministerial income.
(2) Can I claim my housing allowance exclusion in computing my self-employment taxes? Absolutely not.
(3) If I report my church wages as an employee, are my wages subject to FICA taxes? Never.
(4) If I report my church wages as an employee, are my wages subject to income tax withholding? No, unless a minister elects voluntary withholding.
(5) What is the minister’s housing allowance? The portion of a minister’s salary designated in advance by an employing church for housing expenses. This amount is not taxable in computing a minister’s income taxes to the extent it is used to pay housing expenses and does not exceed the home’s fair rental value.