Many ministers file their taxes a bit differently than the average person because of the way they're compensated for their services. Many are considered to have a dual tax status. That is, they are considered to be employees and self-employed at the same time. The IRS doesn't consider a person to be a minister for tax purposes unless he meets certain requirements.
Contact the IRS to find out what the requirements are to be considered a minister. If the Wingo test is used, a person must be able to answer "yes" to these questions: 1) Are you a licensed, ordained or commissioned minister? 2) Are you in charge of a religious organization? 3) Do you perform religious worship services? 4) Do you perform ministerial functions?
Determine your tax status. If you're considered an employee of a church you'll have a W-2. If you're self-employed and a church paid you at least $600 in a year, you'll have a 1099-MISC. You may have a dual tax status if you're considered to be self-employed for paying into Social Security, and an employee for general tax purposes. If you're not sure what your status is, contact the IRS for verification.
Analyze your housing allowance. If you're a minister who is given a housing allowance as part of your employee compensation, you can exclude all or a portion of it when it comes to federal income tax reporting. Housing allowances aren't listed on income documents. Instead, they're declared in writing by the church. If you live in a parsonage, you need not report that housing benefit to the IRS. Housing allowances aren't deductions. They simply aren't included as income when filing federal taxes. However, ministers must pay Social Security taxes on the amount of the housing allowance that's excluded.
Make a choice if you own your own house. You may exclude either your housing allowance, the fair rental value of your home, plus furnishings and utilities, or the expenses of your housing, whichever amount is the lowest.
Fill out the proper forms. If you're an employee, you'll report your salary on IRS Form 1040. Expenses will generally be reported on Form 1040, or Form 1040 Schedule A. Self-employed ministers will generally use one or more Schedule Cs for expenses.
- Since ministers aren't compensated the same for their services, and there are certain IRS rules that pertain to them specifically, it can be difficult for them to properly file their income taxes on their own. If you insist on filing your own income taxes, call the IRS for assistance, or visit the IRS website and read their publications for further help. It would be a good idea to have a tax preparer at least look over your finished income taxes to check them for accuracy.
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