Pastor - how is the church supposed to report income to you; and how are you to report your taxes on your return?
Under the current tax code, Pastors have a unique standing, as defined by the Code. A Pastor is considered to be "dual status"by government tax definitions. You appear to be an employee of the church to the casual observer;
Yet you must file your taxes as a "self-employed" individual.
I suggest a few moments be taken to read this blog for understanding about this matter. [This will actually be presented in a serial of blogs to follow.]
First-the church's part.
If the Pastor is the only paid person for the church, the church should not enter into the full payroll system, requiring quarterly reporting in W-2 wage matters.
[Please note here that 1099 reporting may need to be done at year-end; and this will be discussed in future blogs.]
The church needs to pay the Pastor, according to some approved budget. His "pay" is to be the gross amount divided by the payment interval, such as weekly, or bi-weekly, etc. This "pay" can include an amount the Pastor has named to be "housing allowance" that the church (or church leadership) acknowledges in writing at the beginning of each year. [Housing allowances procedures/rules will be discussed in a later blog also.]
If in the full reporting payroll system because of other employees, the church may withhold income taxes, per the Pastors' request, indicated by having a W-4 on file for him and all employees. The W-4 simply provides employer (church) with name, address, SS#, marital status, number of dependents, and special circumstance items that may/will affect how much taxes and what type of taxes the church may withhold and remit to the IRS and/or Social Security Admin.
[These steps would require someone (Treasurer or financial secretary) to be knowledgeable about required and timely reporting of this to government.]
Romans 13 requires all of us to comply with law authority of the country /state/
city in which we live---whether we like it of not. Note that quarterly filing of 941 information and timely remittance of taxes withheld to proper agencies is required. If questions in this area, please contact me.
If Pastor is the only paid "employee", the above processes are largely not in effect. However, some year-end work is required. The church should supply compensation data to Pastor at the end of the year, using Form W-2 to do so. [There is much confusion about this within our churches and this is often expressed in debates, arguments, decisions at the "I think if should be..." level ---without apparent knowledge of the tax code information available...the Law.]
Sidenote: as Pastors preach the Word of God, there is an expectation that your people will understand and will make effort to align their lives with this Truth, or Law of God. And since the desire for the people is that they be willing servants with teachable spirits regarding the truths from God's Word, I boldly suggest that the Pastor and leadership address tax matters in the same spirit. To him that knoweth to do right and doeth it not... you supply the ending here?
The next blog will address the specifics of what the Pastor's W-2 should look like.
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