Important Documents for Ministers to Keep
There are certain documents all people should keep in an important place for future reference, such as a birth certificate, a social security card, or a last will and testament. For ministers, there are a few other important documents that should be retained and kept in a safe place.
First, for any minister who has opted out of Social Security, and is therefore not required to pay Self-Employment Tax, it is vitally important to retain the completed Form 4361 with an authorized signature form the Internal Revenue Service. Ministers who opt out of Social Security must complete and file Form 4361 (Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders, and Christian Science Practitioners). Once this form is completed and submitted, the minister receives the form back containing the signature of an authorized director from the IRS. This signed document is the only proof a minister has throughout his or her career of this exemption. Ministers who cannot produce a copy of this document face challenges in proving that they are exempt from paying Self-Employment Tax.
Second, ministers should retain a document verifying that they have been ordained, commissioned, or licensed into ministry. This documentation may come in the form of a certificate or a letter, depending on the denomination or church involved. Ordination is one of the requirements for obtaining a clergy housing allowance, which is why it is important to retain a document confirming this status. If taxing authorities ever question why housing expenses were excluded from compensation, proof of ordination becomes essential.
Next, ministers should retain any employment agreement, or written employment policies, given by their employing church. While such agreements or policy manuals are not unique to churches, some of the provisions contained in them may be. If there is ever an employment issue between the minister and the employer, these documents become valuable.
There are other documents that ministers should retain annually for tax purposes. If a minister receives a clergy housing allowance, then proper documentation should be retained for each legitimate housing expense incurred, ranging from large expenditures such as mortgage or lease payments to smaller purchases, such as cleaning supplies. This documentation can be retained in paper form or in an electronic format.
Like all taxpayers, ministers should also retain receipts to document all itemized deductions to be claimed on their tax returns. These deductions may include taxes paid, charitable contributions, medical expenses, home mortgage interest, and others.
Check with a tax professional to determine how many tax years are best for retaining housing receipts and receipts documenting itemized deductions.
Finally, documentation is important in another area. It is vital for a minister to submit receipts for business expenses in a timely manner in accordance with the requirements of the church’s accountable reimbursement plan. In order for reimbursements to remain outside of taxable income, the documentation requirements of the accountable reimbursement plan must be followed by a minister.
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.
For more information or if you need additional assistance, please use the contact information below.
Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369
Tel: (888) 421-0101
Fax: (888) 876-5101