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Clergy Self Employment Tax and Income Tax

Good Afternoon,

 

I have a couple of questions. 

1. Do you need to make quarterly payments if you are having additional taxes withheld on your w-4 to cover social security, Medicare and income tax?

2. Also as a pastor to you pay income tax on the fair market rental value (includes utilities)?

 

The church pays me by W-2 and withholds additional federal taxes that I have requested, how do I know if it is enough?

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1 Reply
DashonnonH
Employee Tax Expert

Clergy Self Employment Tax and Income Tax

Good Afternoon, if the additional withholding from your W2 is enough to cover the self-employment taxes (Social Security and Medicare) then you will not need to make estimated payments. 

 

Your parsonage is reported on your tax return and is subject to income tax and self-employment taxes but you can offset this income with expenses paid including utilities. Any amount of parsonage received over the expenses paid will be included in your income. 

 

A 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. Generally, those expenses include rent, mortgage interest, utilities, and other expenses directly relating to providing a home. The amount excluded can't be more than reasonable compensation for the minister's services.

 

Below are a couple of ways to check if you are paying enough in taxes during the year:

 

You can use a tax calculator, throughout the year, to check if your withholding is enough. Use Tax Caster to run scenarios of your situation. Tax caster is a yearly calculator, so this lets you know if you are expected to get a refund or owe additional taxes based on the year's income and withholding. So if you have only 6 months of income, you would estimate the rest of the year based on what you expect to earn. 

 

https://turbotax.intuit.com/tax-tools/calculators/taxcaster/

 

When you prepare a current years tax return in Turbo Tax Online, the software will calculate your next year's estimated taxes based on the info your entered. You can adjust the income and withholding info if you believe your income will change over the next year. 

 

https://ttlc.intuit.com/turbotax-support/en-us/help-article/tax-payments/turbotax-calculate-estimate...

 

 

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