2008年2月26日星期二

2/20/2008_Don to Cerina re: Pastor's Tax_from BGCT

From: Don Laing [mailto:revlaing75007@yahoo.com]

Sent: Wednesday, February 20, 2008 4:13 PM

To: Cerina; Cerina Chu

Cc: flora75007@gmail.com; Paul

Subject: Fw: From Carl Deaton CPA

Dear Sister Cerina,

I've attached the eamil from the cpa that the Denton Baptist Association referred us to. His name is Carl Deaton.Please let me know if I can be of further assitance.

Blessings,

Pastor Don



----- Forwarded Message ----
From: Carl Deaton carl@mydentoncpa.com

To: revlaing75007@yahoo.com

Sent: Wednesday, February 20, 2008 3:56:40 PM

Subject: From Carl Deaton CPA

Don,

Here is some information that hopefully will help your church in understanding the taxation of a ministerʼs compensation. The first page of the accompanying attachment is page 15 from IRS Publication 1828 and it talks about a ministerʼs compensation paid by a church not being subject to FICA taxes. The remainder of the attachment is pages from IRS Publication 517, which goes into more detail about taxation of ministers. Page 3 of that publication talks about employment tax status.

The general rule is that ministers have a dual tax status. You are considered an employee for Federal income tax purposes, which means the church should give you a W2 form. But for Social Security tax purposes, you are considered self-employed with respect to ministerial income, because as a minister you had the opportunity during the first two years of your ministry to elect out of paying social security tax on ministerial earnings. A minister who does not elect out of social security then has the responsibility to pay social security tax in the form of self-employment tax (SECA) on his personal tax return.

If you think about it, the church should not withhold FICA and Medicare tax from a ministerʼs compensation because the minister may have elected out of social security. The decision to elect out is a personal decision of the minister, and a church does not have the right to know if he has elected out unless the minister lets the church know. The church simply withholds no FICA or Medicare tax from the ministerʼs pay, and the minister has the responsibility for either paying it or not paying it based on whether he elected out.

That being said, when a church does its tax reporting correctly, it saves having to pay the 7.65% employer match of FICA and Medicare that is pays for any non-ministerial employee. If the minister has not elected out, he incurs most of this additional amount on his personal tax return because the self-employment tax rate is 14.13%. Many churches I deal with recognize this additional burden that the minister incurs by increasing his compensation by an amount equal to the employer FICA and Medicare match that it is saving.

Hope this helps.

Carl Deaton
940-387-8563 x14

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