Tax Services for Ministers and Clergy

Regardless of one’s profession, social standing or community involvement all US citizens and residents have tax reporting, income reporting and tax payment obligations. However, certain professions and statuses can confer special tax treatment on an individual, organization or entity. For instance pastors, ministers and other members of the clergy require specialized tax treatment by the IRS. At the Tax Law Offices of David W. Klasing in Irvine, I provide tax services for ministers and clergy and understand the tax implications of being the member of a religious organization.

Special Tax Rules for Ministers, Clergy, Pastors and Rabbis

There are special tax rules that apply to churches and ministers (e.g. priests, pastors, and rabbis). The IRS has its own special criteria to determine whether someone is a “minister” for federal tax purposes; and that criteria may differ from one’s church (or synagogue). Thus, it is important for churches and clergy to inform themselves whether their clergy satisfies the IRS’s criteria. This site discusses those criteria.

California Tax Law OfficesIn general, an individual is considered to be a minister if he or she is, “duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination.” Furthermore to be considered a minister the individual must hold the authority to conduct religious services, is authorized to perform sacerdotal functions, and administer sacraments as per the doctrine and practices of the religious institution. Furthermore for religious orders that may ordain some ministers while licensing or commissioning others, to be considered a minister for purposes of taxation & withholding the individual must be permitted to perform all, or nearly all, of the functions that an ordained minister would be permitted to carry out.

Why is it important to know whether you can qualify as a minister?

The reason why it is important for a person to know whether he or she qualifies as a “minister” under the IRS’s criteria is because ministers are subject to both special income tax rules and tax reporting requirements. To mention just a few examples, ministers are subject to special rules relating to: (1) whether they are eligible to avoid taxation on their “housing allowance;” (2) whether they are deemed “self-employed” or an “employee” for Social Security purposes; and (3) whether their wages are subject to income tax withholding.

Perhaps one of the most confusing things is that most ministers have a dual tax status. That is, they are employees for purposes of federal income tax, but they are self-employed for purposes of computing Social Security tax. As explained more on this site, certain implications follow from this—and often there are certain tax advantages of being one over the other. As explained elsewhere on this site, we sort out this potential confusion.

Put our tax experience to work for you

As a practical matter, it is important that a minister properly comply with the special tax and reporting rules, otherwise he or she may find himself or herself subject to audit by the IRS and with an asserted tax deficiency (tax liability). We can address potential concerns regarding a minister’s unique privileges and benefits in regard to income, Social Security and Medicare for tax purposes. With proper planning, our office can help avoid an unfavorable consequence after nasty IRS audit. And even if a minister has already been audited by the IRS and been found to owe more tax, our office may be able to help with that, too.

Tax law attorney and CPA David W. Klasing has achieved an advanced degree in tax law. When you receive advice from Mr. Klasing or one of the experienced tax lawyers and knowledgable on tax services for ministers of the Tax Law Offices of David W. Klasing, you can rest assured that the tax advice has been thoroughly researched and fully-considered. To schedule a reduced-rate consultation, call 800.681.1295 today.