When Are W‑2 and 1099 Forms Required to Be Filed
Churches function as employers, contractors, and ministry organizations—but despite their nonprofit status, they are not exempt from federal payroll reporting laws. The IRS requires churches to properly classify workers and file W‑2 and 1099‑NEC forms each year, just like any other employer. Failing to follow these rules can result in penalties, back taxes, and compliance issues for both the church and its staff.
This article explains when churches must file W‑2s and 1099s, who receives which form, and the rules unique to clergy compensation.
The IRS requires churches to classify their workers as either employees (W‑2) or independent contractors (1099‑NEC). Worker classification is based on behavioral control, financial control, and the nature of the relationship—known as the Common Law Test.
A worker is an W2 employee if the church controls:
- Their schedule
- How work is performed
- The tools or equipment used
- Ongoing employment expectations
A worker is a independent contractor if he or she:
- Controls how the work is performed
- Provides their own tools
- Is paid per job or event
- Does not receive employee benefits
Pastors and Ministers
Most ministers are considered employees for income tax reporting, even though they are treated as self‑employed for Social Security (SECA). Churches should issue W‑2s, not 1099s, for clergy compensation.
A Minister Should NOT Receive a 1099 If:
- They serve as the church’s pastor
- They are on regular church staff
- The church controls their schedule and ministry duties
A Minister MAY Receive a 1099 If:
- They guest‑preach at another church
- They conduct weddings, funerals, or services for outside organizations
Church Staff
- Administrative assistants
- Custodians and maintenance staff
- Regular childcare or nursery workers
- Worship/production employees on regular payroll
Part‑time or Seasonal Employees
Anyone on payroll—regardless of hours—receives a W‑2.
W‑2 Filing Deadlines:
- Provide W‑2s to employees by January 31
- File W‑2 Copy A electronically or by mail with the SSA by January 31
1099‑NEC Filing Deadline:
- File with the IRS by January 31
- Provide a copy to the contractor by January 31Churches must also issue a 1099‑NEC to independent contractor ministers (rare) who clearly meet contractor criteria.
Volunteers: No W‑2 or 1099
Volunteers do not receive W‑2s or 1099s unless:
- Reimbursements exceed actual expenses
- They receive a stipend or monetary compensation
8 Common Filing Mistakes Churches Make
- Issuing pastors a 1099 instead of a W‑2
- Paying musicians as contractors when they function like employees
- Failing to issue a 1099‑NEC to guest speakers paid $600+
- Incorrectly excluding taxable gifts and bonuses from W‑2 wages
- Not including taxable fringe benefits on W‑2s
- Missing the January 31 filing deadline
- Not filing electronically when 10+ forms are required
- Assuming tax‑exempt status exempts payroll reporting (it doesn’t)
If you need guidance that is tailored specifically to your unique situation, we encourage you to connect directly with Pro Advisor Support. Their experienced team specializes in assisting clergy and church organizations with complex tax, payroll, bookkeeping, and HR matters. Whether you have detailed questions about compliance, deductions, or planning strategies, they can provide expert advice and walk you through the next steps with clarity and confidence.
Clergy Financial Resources
Tax I Payroll I Bookkeeping I HR | Consulting
11214 86th Avenue N.
Maple Grove, MN 55369
Tel: (888) 421.0101
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
Email: clientservices@clergyfinancial.com