There is no single test for determining if an individual is an independent contractor or an employee. Employee misclassification has always been an important issue and often can trigger IRS attention.

Generally, an employee has an ongoing relationship with the church which includes a job description and compensation paid by the hour or salary. A contractor would have an irregular relationship, no job description and paid by contract only. However, the following guidelines should be taken into account, but are not limited to:

An Independent Contractor:

• Operates under their business name
• Has his/her own employees
• Maintains a separate business checking account
• Advertises his/her business’ services
• Invoices for work completed
• Has more than one client
• Has own tools and sets own hours
• Keeps business records
• Written contracts describing the relationship the parties intended to create and how the parties actually work together.

An Employee:

• Performs duties dictated or controlled by the church
• Is given training for work to be done
• Works for only one employer
• Paid hourly or salary
• Job description
• The church provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay.
• Reimbursements for church related business expenses

Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

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