Quarterly Tax Payment Deadline & Voluntary Withholding

Now that the May 17 deadline for filing federal tax returns has passed, the next deadline that is relevant to many ministers is the quarterly estimated tax payment due on June 15, 2021.  

Ministers are Exempt from Withholding Requirement:

Ministers are exempt from having employing churches withhold federal taxes. This is different from other kinds of employees, who are subject to mandatory federal tax withholdings by their employers. However, a minister is not exempt from paying federal taxes, but merely from having an employer withhold them. 

Ministers and Churches May Elect Voluntary Withholdings:

Ministers may enter into voluntary tax withholding arrangements with employing churches. The minister’s federal taxes are withheld from pay in the same manner as any other employee would have taxes withheld by an employer.

Electing voluntary withholdings is advantageous in that a minister does not have to make direct quarterly estimated federal tax payments. This would render the upcoming June 15 deadline of no concern. The church withholds federal taxes from paychecks and submits the tax payments in the same manner that any employer would do so for any employee.

To enter into a voluntary withholding arrangement, a minister must submit a completed Form W-4 to the employing church instructing the church as to how much federal tax to withhold.

Social Security Payments Must Also be Considered:

The discussion above applies only to federal taxes. Ministers must also consider the proper payment of self-employment (Social Security) taxes.

First, some ministers have opted out of Social Security and are therefore exempt from paying self-employment taxes. For these ministers, no further action is required.

Second, some ministers are still in the Social Security system and must pay self-employment taxes. Technically, the self-employment taxes are to be paid via quarterly estimated taxes because ministers are considered self-employed for social security purposes, even if they have entered into a voluntary withholding arrangement with their church.

However, there is a way to simplify the manner in which a minister pays self-employment taxes. A minister may voluntarily withhold an extra amount for federal taxes in order to cover the estimated amount of self-employment tax due. In order to make this arrangement with the employer church, the minister must indicate the additional amount to be withheld on Form W-4.

Ministers should seek advice from a tax professional in order to determine the appropriate amount of additional voluntary withholdings to cover the self-employment tax as well as federal income tax. Ultimately, the minister’s annual tax return will be used to reconcile the figures.

For any minister who has not entered into a voluntary withholding arrangement, or for any minister who is subject to self-employment tax but has not had additional amounts withheld, quarterly payments must be submitted directly. The payment should be submitted using Form 1040-ES. Keep in mind that the next quarterly payment due date is approaching – June 15. A tax professional can assist in determining the amount that should be submitted each quarter.

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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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