Churches are required to pay FICA (Social Security and Medicare) taxes for all non-clergy employees. The IRS considers clergy as dual status employees which are subject to SECA tax for social security purposes. Due to this status, the church cannot pay FICA tax for clergy. Many compensation packages have an extra taxable line item labeled as a social security allowance. This would be the equivalent of the employer’s share of FICA. This type of allowance is calculated on the base salary and housing multiplied by 7.65.%.
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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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