15 Questions Related to a New Call
How does the church’s social security allowance compare to other similar-sized churches? Are there limits or guidelines for the accountable or nonaccountable reimbursement plan? What other travel-related expenses does the church cover besides auto mileage? Are there specific guidelines or a budget for ministry and professional-related expenses? What are the expectations for the pastor’s involvement…
2025 Housing Allowance Tips
Who is Eligible for a Housing Allowance? According to the IRS definition, clergy who are duly ordained, commissioned, or licensed by a recognized religious body constituting a church or church denomination. Does the Church Have to Approve It? Housing allowances for a qualifying religious organization must be designated in advance, clearly defined, and specified before…
Estimated Tax – Safe Harbor Rules
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…
Qualified Charitable Distributions
A Required Minimum Distribution (RMD) refers to the minimum amount that must be withdrawn annually from retirement accounts such as traditional IRAs, 401(k)s, 403(b)s, and other qualified retirement plans, starting in the year the account holder turns 73 (or 70½ if they turned that age before January 1, 2020). The purpose of RMDs is to…
The Windfall Elimination Provision (WEP)
The Windfall Elimination Provision (WEP) The Windfall Elimination Provision (WEP) reduction has been effective since it was first enacted in 1983. However, it’s important to note that recent legislation has repealed the WEP. The Social Security Fairness Act, signed into law on January 5, 2025, ends the WEP effective December 2023. The Windfall Elimination Provision…
Tips for hiring a clergy accountant
Hiring a clergy accountant involves several considerations to ensure they are well-versed in the unique financial aspects of religious organizations: Expertise: Make sure the accountant has relevant experience with clergy or nonprofit organizations. Ask about their understanding of clergy-specific tax laws and church-specific financial matters, such as housing allowances and restricted gifts. Recommendations: Get recommendations…
How to report social security allowance
When completing a W-2 for an ordained pastor who receives a salary and an additional allowance for Social Security and Medicare taxes (often referred to as a SECA allowance), the salary and the SECA allowance should be included in Box 1. Here are the steps to do so: Box 1 – Wages, Tips, and Other…
What is the differenced between 4361 and 4029 form?
Both forms are used to apply for exemptions, but they cater to different groups and purposes: IRS Form 4361 is used by ministers, members of religious orders, and Christian Science practitioners to apply for an exemption from the self-employment tax on their ministerial earnings. This exemption does not directly focus on Social Security and Medicare…
W-4 Instructions for Clergy
The W-4 form consists of five steps. Since not every step applies to all employees, some sections may justifiably be left blank. Step 1 Clergy and non-clergy individuals must provide personal information, ensuring that the name, address, and Social Security number entered match the records on file with Payroll. This section also requires you to…
IRS guidelines on designating a housing allowance
The IRS guidelines on designating a housing allowance for clergy are detailed and specific. Here is a comprehensive overview: Designation of Housing Allowance Advance Designation Requirement: The housing allowance must be officially designated in advance of payment by the employing church or other qualified organization. This designation can be made in an employment contract, in…
