Are ministers employees or self-employed?
The answer is “both.” Ministers have what is commonly referred to as “dual tax status.” For federal income tax purposes, a minister is generally treated as a common-law employee. For payments into Social Security, the minister is always self-employed. This is an IRS regulation and not an election. When a church hires an employee, one…
Unemployment insurance for churches due to COVID-19
The COVID Phase III Stimulus Package provides specific provisions that will allow pastors or ministry staff who have lost their jobs to apply for unemployment benefits. The law creates a temporary program through December 31, 2020, to provide payment to those not traditionally eligible for unemployment benefits (self-employed, independent contractors, those with limited work history…
New 2020 W-4 – Line by Line Instructions
The new version of the 2020 Form W-4, Employee’s Withholding Certificate, was issued Dec. 4, 2019. Employees filling out the form no longer are to be able to claim any withholding allowances. The one-page Form W-4 is divided into five instructional sections: Step 1, Enter Personal Information, includes Steps 1a, 1b, and 1c; Step 2,…
8 questions about employee expense reimbursements
The IRS knows full well how lax a lot of employees are about documenting their expenses—and how often churches let it slide. We have collected a handful of recent questions that may be helpful to your church. Q. If an employee uses a personal credit card for a ministry purchase, is there a time limit…
Q&A – The rules for cellphone reimbursement
Q: “When it comes to reimbursing employees or providing a monthly stipend for the use of their personal cellphones for ministry purposes, is this a non-taxable fringe benefit?” A: Yes, provided that your reimbursement is reasonably calculated to actually reimburse the employees for the actual costs of maintaining the phone. Creating a policy for employee…
Sample Letter Explaining the 2020 Form W-4 to Employees
Beginning in January 2020, there will be a whole new look for the W-4 form, which is where workers tell their employers how much money to take out — or withhold — from their paychecks for federal income taxes. The biggest change to the W-4 form is the removal of the allowances section. You’ll no longer…
IRS Releases New Tax Withholding Estimator
The IRS has released an enhanced Tax Withholding Estimator that incorporates changes from the redesigned Form W-4, Employee’s Withholding Certificate. The new Form W-4 includes changes that can affect employees’ refunds or the amount of tax they owe. For example, income tax withholding is no longer based on the employee’s marital status and withholding allowances,…
Common Payroll Errors to Avoid
Let’s face it. Managing church payroll – and the avalanche of payroll regulations – means you’re under a lot of scrutiny, and you have to get it right. Each year sixty percent of the church W-2 forms are reported with errors. This is created by the lack of understanding of the reporting requirements of taxable…
FAQs on the 2020 Form W-4
1. Why redesign Form W-4? The new design reduces the form’s complexity and increases the transparency and accuracy of the withholding system. While it uses the same underlying information as the old design, it replaces complicated worksheets with more straightforward questions that make accurate withholding easier for employees. 2. What happened to withholding allowances? Allowances are no…
It’s here! IRS rolls out final Form W-4 for 2020
The IRS has released the final 2020 version of Form W-4, Employee’s Withholding Certificate. The IRS stood its ground and dropped the word “Allowance” from the title of the form, as well as dropping withholding allowances from the body of the form. Filling out and submitting a Form W-4, Employee’s Withholding Allowance Certificate, the Employee’s…
