@CyndieT wrote:
Thanks - Our issue is with non-clergy. We withhold Fed & State but not FICA they have to pay that on schedule SE. Housing is also not an issue with these employees as they do not receive housing allowance. I think the best work around is to override the schedule SE gross income to include their 403b withholding. Unless someone else has a different suggestion.
That's incorrect and illegal. You must withhold FICA and medicare tax for non-clergy. They are regular employees and you must follow the rules for regular employees. You must even withhold FICA and medicare from clergy who are not in clergy roles. (For example, someone who is an ordained minister is hired to be the Sunday school supervisor, and does not perform ministerial duties is a regular employee subject to FICA and medicare withholding. You must include the FICA and medicare on their W-2s and on your quarterly form 941s. You must remit the FICA and medicare wages to the IRS. Regular employees are also subject to mandatory wage withholding for state and federal income taxes with a W-4, its not optional like it is for ministers.
The special rules for ministers' taxes only apply to people who actually perform ministerial services.
For example, we had a "youth pastor" who was not licensed as a minister in our denomination, even though je was licensed in another denomination. He was not eligible to be treated as a minister for income tax purposes until he completed 2 seminar courses and an interview with the bishop. Until then, he was treated as a regular employee and was required to have SS and medicare tax withheld.
From the IRS:
Most services you perform as a minister, priest, rabbi, etc., are ministerial services. These services include:
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Performing sacerdotal functions;
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Conducting religious worship; and
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Controlling, conducting, and maintaining religious organizations (including the religious boards, societies, and other integral agencies of such organizations) that are under the authority of a religious body that is a church or denomination.
You are considered to control, conduct, and maintain a religious organization if you direct, manage, or promote the organization's activities.
