Quarterly Payments Tips
In a non-clergy job, the employer withholds an employee’s federal income tax and Social Security tax from every paycheck. But clergy are classified as dual status employees and are exempt from both federal income tax withholding and considered self-employed for Social Security tax purposes. This means a church normally won’t withhold income tax and should never withhold Social Security tax (FICA) for clergy. Therefore, the minister will have to pay tax to the IRS in quarterly installments throughout the year.
You must pay estimated tax payments if you expect to owe a certain amount that the IRS sets each year. For 2021, this amount is $1,000 or more after subtracting withholding and refundable credits, and you expect the withholding and credits to be less than 90 percent of the tax on your 2021 return or 100 percent of the tax shown on your 2020 return (which must cover all 12 months).
You can use your previous year’s tax return as a guide for estimating your tax liability. If this is the first year making quarterly payments, use Form 1040ES to help estimate your total tax liability at the beginning of the year and divide that total by four. Make a check out for this amount and submit it to the IRS by April 15. Subsequent payments are due June 15, Sept. 15, and Jan. 15.
If your situation changes, and you determine mid-way through the year that you’ll owe more or less than you estimated, you can make adjustments on your remaining payments. If you find at the end of the year that you’ve underpaid, you might have to pay a penalty.
Contact Clergy Financial Resources to help you with the next steps.
Clergy Financial Resources
Tax I Payroll I Bookkeeping I HR
11214 86th Avenue N.
Maple Grove, MN 55369
Tel: 1 (888) 421.0101
Fax: 1 (888) 876.5101
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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.
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