Clergy W-2 Form

Ministers working for a church or church agency should receive a Form W-2 by January 31. Ministers who report their federal income taxes as self-employed on Form 1099, may face a significant risk of additional taxes and penalties, if they are audited and reclassified as employees by the IRS.

While the majority of ministers are employees for federal income tax purposes, they all are self-employed for social security purposes. This means that ministers are exempt from social security and Medicare withholdings, even though they report their income taxes as employees and receive a W-2 from their church. Rather, they pay the self-employment tax on Schedule SE when filing their return.

Determining a taxpayer’s correct reporting status under the common law employee test is often difficult. The IRS has developed a list of 20 factors to be used as an aid in determining whether an individual is an employee as defined by the IRS. For more information on the correct filing status, please feel free to contact us.

For the most part, ministers are deemed to be common-law employees of the religious organization for which they work, and thus they should receive a W-2 form.

There are only a limited number of instances where a 1099-MISC may be applicable, one of which is if a minister is a traveling evangelist. As this is an easy IRS audit target, a tax preparer must exercise due diligence in ascertaining that a 1099-MISC issued to a minister is appropriate.

The IRS uses a checklist to evaluate whether individuals are independent contractors or employees. If your church controls the “who, where, when and how” of your work schedule, you’re probably an employee for tax purposes.

If you control your work product and have other clients, you’re most likely an independent contractor and should get a 1099 tax form.