What are some of the common mistakes when employing ministers of the gospel?

The most common error is for a church/mission agency to give their employed minister a 1099 as if self-employed.  This error is many times compounded by the housing allowance, expense reimbursements, and fringe benefits.  Fringe benefits are available to dual-status ministers not to self-employed individuals.  If a minister of the gospel receives a 1099 and employee fringe benefits, he is receiving wrong treatments.  These “before tax” benefits are for “dual-status” ministers who receive W-2’s.  Self-employed 1099 individuals are not entitled to employee fringe benefits. The second most common error is for churches to withhold and match Social Security and Medicare taxes from a minister’s wages.  This is further compounded when the church designates a housing allowance.  Employees who have Social Security and Medicare taxes withheld do not qualify for a housing allowance.  If a minister of the gospel has Social Security and Medicare taxes withheld, he is receiving wrong treatments. (Click here for instructions on how to correct this error.)

For more information refer to IRS Publication 517.

Attention: Tax Law is subject to interpretation. Please be advised that the material contained on this Web site is for information only and is not intended to be a substitute for professional legal advice. The Stewardship Services Foundation endeavors to update the information on this site on a regular basis, but cannot guarantee its accuracy at all times.