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Are ministers employees or self-employed for federal tax purposes?

July 01, 2023

Ministers have a dual tax status.  For federal income taxes they ordinarily are employees, but for Social Security they are self-employed with regard to services performed in the exercise of ministry.  These two rules are summarized below.

1.  Income taxes.  For federal income tax reporting, most ministers are employees under the test currently used by the Internal Revenue Service (IRS).  This means that they should receive a Form W-2 from their church at the end of each year (rather than a Form 1099).  It also means that they report their employee business expenses on Schedule A rather than on Schedule C.  A few ministers are self-employed, such as some traveling evangelists and interim pastors.  Also, many ministers who are employees of a local church are self-employed for other purposes.  For example, the minister of a local church almost always will be an employee, but will be self-employed with regard to guest speaking appearances in other churches and services performed directly for individual members (such as weddings and funerals).

2.  Social Security.  The tax code treats ministers as self-employed for Social Security with respect to services performed in the exercise of their ministry - even if they report their income taxes as an employee.  This means that ministers must pay self-employment taxes (Social Security taxes for the self-employed) unless they have filed a timely exemption application (Form 4361) that has been approved by the IRS.  It should be noted that few ministers qualify for this exemption.

See IRS Publication 517  (Social Security and Other Information for Members of the Clergy and Religious Workers).

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