Paying Social Security Tax

Clergy realize that the IRS applies special rules when dealing with clergy taxes and withholdings. Clergy are considered employees for income tax purposes, and self-employed for Social Security (or SECA) and Medicare purposes.

While ELCA clergy get W-2 forms from their congregations or employers, this means that under these rules clergy are exempted from mandatory income tax withholdings, and congregations may not pay any Social Security withholding. Clergy are responsible for paying their income taxes and all of their Social Security payments. One way to handle this obligation is for clergy to file quarterly estimated tax payments directly with the IRS.

One tip to remember is that although clergy are considered self-employed for Social Security and the employer cannot make Social Security withholding payments for clergy, clergy can direct their employers to withhold funds that can be applied to both the income tax liability and the Social Security (self-employment tax) payment obligation. Clergy can complete IRS Form W-4 Employee’s Withholding Allowance Certificate which will direct the amounts that the congregation/employer will withhold for income tax purposes.

So, if clergy know their total income tax and social security tax liability for 2009 is $ XXXX, they can use Form W-4 to have a portion of that amount taken out of each paycheck and sent in to the IRS. This avoids having to 1.) remember to pay the quarterly estimated payments, 2.) having to make sure the money to cover those quarterly payments is in their checking accounts; and 3.) having to mail those payments. With the use of the W-4 form, each paycheck has been reduced, but the money is being sent directly to the IRS and no quarterly filing should be necessary.

It is always important throughout the year for all employees to check on the payments and deductions made If for some reason the income or tax liability assumptions change, IRS Form W-4 can also be amended to request different withholdings.

_{Administration Matters January 2009}