Often a church treasurer or board will ask their minister what tax status they prefer as if it is an optional decision. Our theological colleges and seminaries do a very poor job teaching ministerial students about tax law and how it applies to them. Due to inadequate knowledge of tax law, many wrong decisions have been made.
Many clergy tax advisors, accountants, and publications have continued to recommend or show examples of using Schedule C for employed ministers. The "fight for the right to use Schedule C" that has caused thousands of ministers to be audited and assessed additional tax liabilities is unfortunate.
If you call the IRS "800" number six times and ask for information concerning the correct status of a minister, you may get six different answers. It is unfortunate that some of the confusion concerning the minister's correct status has been caused by uninformed IRS employees and the courts. Going against the historic position stated in IRS Publication 517 and others, results in taxable fringe benefits and increases the IRS audit exposure. Most ministers claiming to be independent contractors cannot afford legal representation to pursue their case through the courts.
If you would like additional information on clergy taxation, please give us a call at (877) 336-2626.