This means that your salary on Form W-2, Wage and Tax Statement, the net profit on Schedule C, and your housing allowance less pertinent deductible expenses are subject to self-employment tax on Schedule SE (Form 1040), Self-Employment Tax. The services you perform in the exercise of your ministry are generally covered by social security and Medicare under the self-employment tax system, regardless of your status under the common law. The minister must include the amount of the fair rental value of a parsonage or the housing allowance for social security coverage purposes. The fair rental value of a parsonage or the housing allowance is excludable only for income tax purposes. In order to be able to exclude the housing allowance from income, the minister's employing organization must officially designate the housing allowance as such before paying it to the minister. If your housing allowance exceeds the lesser of your reasonable compensation, the fair rental value of the home, or your actual expenses directly relating to providing the home, you must include the amount of the excess in income. If you own your home, you may still claim deductions for mortgage interest and real property taxes. The amount excluded can't be more than reasonable compensation for the minister's services. Generally, those expenses include rent, mortgage interest, utilities, and other expenses directly relating to providing a home. However, the amount excluded can't be more than reasonable compensation for the minister's services.Ī minister who receives a housing allowance may exclude the allowance from gross income to the extent it's used to pay expenses in providing a home. A minister who is furnished a parsonage may exclude from gross income the fair rental value of the parsonage, including utilities. Housing AllowanceĪ licensed, commissioned, or ordained minister who performs ministerial services as an employee may be able to exclude from gross income the fair rental value of a home provided as part of compensation (a parsonage) or a housing allowance provided as compensation if it is used to rent or otherwise provide a home. Use Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship) to report these earnings and related expenses. If you're an independent contractor, the offerings or fees you receive for performing marriages, baptisms, funerals, etc. Both the salary you receive from the congregation and fees you receive from members of the congregation may be included for social security coverage purposes and subject to self-employment tax (see below). However, amounts you receive directly from members of the congregation, such as fees for performing marriages, baptisms, or other personal services, are generally earnings from self-employment for income tax purposes even if you’re an employee otherwise. If a congregation employs you for a salary, you're generally a common-law employee of the congregation and your salary is considered wages for income tax withholding purposes. For more information about the common-law rules, see Publication 15-A, Employer's Supplemental Tax Guide. Generally, you're an employee if the church or organization you perform services for has the legal right to control both what you do and how you do it, even if you have considerable discretion and freedom of action. Employee or Self-Employedįor income tax purposes, facts and circumstances determine whether you're considered an employee or a self-employed person under common-law rules. However, the way you treat expenses related to those earnings generally differs if you earn the income as an employee or as a self-employed person. Regardless of whether you're a minister performing ministerial services as an employee or a self-employed person, all of your earnings, including wages, offerings, and fees you receive for performing marriages, baptisms, funerals, etc., are subject to income tax. However, there are some exceptions, such as traveling evangelists who are independent contractors (self-employed) under the common law. A licensed, commissioned, or ordained minister is generally the common law employee of the church, denomination, sect, or organization that employs him or her to provide ministerial services.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |