Because clergy are exempt from tax withholding on their paychecks, they will usually need to make Estimated Tax Payments throughout the year to ensure that their taxes are paid. If you don’t do it, it can result in penalties.

If you expect to owe at least $1,000 in tax for 2025 AND all of your 2025 withholding and credits will be less than the smaller of:

• 90% of the 2025 tax OR
• 100% of the tax that was on your 2024 return

Then yes, you need to make estimated tax payments.

In simpler terms, if you will owe tax for 2025 and you don’t have withholding to cover it, you should be making estimated payments.

Estimated Payment Penalty

If you don’t make your estimated tax payments on time, you may face a penalty for underpayment of estimated tax. Here’s a brief overview:

1. Calculation of Penalty: The penalty is calculated based on the amount of underpayment, the period during which the underpayment occurred, and the IRS’s published quarterly interest rates.

2. Avoiding the Penalty: Generally, you can avoid the penalty if you owe less than $1,000 in tax after subtracting your withholding and refundable credits, or if you paid at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year.

3. Waiver of Penalty: The IRS may waive the penalty if the underpayment was due to a casualty event, disaster, or other unusual circumstance, or if you retired (after reaching age 62) or became disabled during the tax year or the preceding tax yea

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Clergy Financial Resources
Tax I Payroll I Bookkeeping I HR | Consulting
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421.0101
Fax: (888) 876.5101

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.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421-0101 
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com