How the “American Jobs Act” Will Affect Church Employees: At the beginning of 2010, a “payroll tax holiday” was passed. Employees normally pay 6.2% on their first $106,800 of wages into Social Security, however, this “tax holiday” decreased that amount by 2%. This allowed employees to pay 4.2% of wages into Social Security instead of 6.2% At the end of 2011, the “tax holiday” was set to expire. On September 8, 2011 President Obama proposed  the “American Jobs Acts.” Included in this act was another reduction of Social Security taxes. This will decrease the amount of Social Security tax paid by an employee to 3.1%(2010: 6.2%, 2011: 4.2%, 2012: 3.1%). The White House expects that this will give each household in the United States an extra $1,500 to spend during the year. Since clergy are dual-status, they will not see this benefit in their paychecks. Social Security for clergy is calculated at the time of their tax return. Clergy will see the 2011 “payroll tax holiday” on their 2011 tax returns (completed in 2012) and the increased reduction from the “American Jobs Act” on their 2012 tax returns(completed in 2013). How the “American Jobs Act” Will Affect Churches: In addition to the tax decrease for employees, the “American Jobs Act” will also cut taxes for churches. Under the “American Jobs Act” the amount of payroll taxes churches pay for each employee will be cut in half from 6.2% to 3.1%(on the first $5 million in wages). Churches that hire new workers or give raises current workers would get an even bigger benefit: On payroll increases up to $50 million they would pay no Social Security tax. Clergy Financial Resources Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations.

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

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