When you receive your first call to a church, there are important issues to consider:

• What is the recommended way to handle the financial arrangements provided for you by the church?
  
  
• What process is in place to deal with pastor/congregation relations?
  
  
• What is your responsibility for income and Social Security taxes?
  
  

Agreements regarding compensation, benefits, reimbursement of your ministry-related expenses, vacation time, etc., are all important considerations in your call to a church. Misunderstandings at the beginning of your first pastorate can be avoided if you and the church carefully spell out the agreements and put them in writing.

MMBB recommends that churches follow a thorough process in determining a pastoral ministry budget. It is recommended that the pastoral ministry budget be arranged so that reimbursement for ministry-related expenses, compensation and benefits are each clearly identified and separated in the church budget. Ministry-related expenses include automobile reimbursement, convention expenses, continuing education, Ministers Council dues, hospitality funds, books, periodicals and other resources.

Compensation is the item that is considered "pay," and includes cash salary, parsonage and utilities or housing allowance.

Benefits provided by most churches include the Benefits for Life program. Benefits for Life includes important protections for retirement, disability and death and is offered by The Ministers and Missionaries Benefit Board (MMBB). Benefits for Life provides a firm base, along with Social Security, to protect families now and to build financial security for retirement. Contact MMBB for information about the Plans. Enrollment requires an application from you and a check for the first month's premium from your employer. Medical/dental protection is available through the MMBB-endorsed health plans.

A Social Security/Medicare tax offset also is considered a benefit.

Communication between the pastor and congregation is crucial in establishing a healthy relationship. Problems that develop frequently can be traced to some misunderstanding or failure in communication. One way to avoid this is through a pastoral relations committee. If the church does not have one, request that a committee be established and that it include some members of the search committee. If a pastoral relations committee exists, encourage it to meet regularly. This group can be particularly helpful during your first year with the church. A helpful resource is the booklet "Pastoral Relations Committee," available from Judson Press, P.O. Box 851, Valley Forge, PA 19482-0851, 800.458.3766.

Most ordained ministers are considered "common law employees" by the Internal Revenue Service (IRS) for the purpose of Federal income tax, but are self-employed for Social Security. As a result, you will be responsible for paying your estimated taxes quarterly.

You should obtain IRS Schedule 1040-ES to declare your estimated income and taxes, and begin paying estimated taxes at the appropriate quarterly due date. The quarterly payments are due April 15, June 15, September 15 and January 15. Contact your local IRS office or call 800.829.3676 to obtain Schedule 1040-ES.

Your housing allowance or the rental value of parsonage and utilities is excluded from Federal income tax. However, the item is included for determining Social Security/Medicare taxes.

Since ministers must pay Social Security/Medicare taxes on a self-employed basis, MMBB recommends that churches and church related organizations provide an "offset" equal to 50% or more of the minister's annual Social Security/ Medicare tax. Any offset provided is additional income to you and must be included as income for calculating Federal income tax, as well as computing your Social Security/Medicare tax.

While the law allows clergy the option of not participating in Social Security, very few are eligible for exemption. Exemption must be for reasons of conscience or religious principles. It is illegal to obtain an exemption for financial reasons, personal preference, or any other reason except as stipulated above. Exemption is possible only if you apply within two years of receiving earnings of $400 or more for the performance of service in the ministry.

Before an exemption is approved by the IRS, you must inform the Ministerial Leadership Commission of American Baptist Churches that you are opposed to participation in Social Security for reasons of conscience based on religious principles. The address for the Ministerial Leadership Commission is P.O. Box 851, Valley Forge, PA 19482-0851. You will be contacted by a representative of the IRS to verify that you are aware of the grounds for exemption and that you want the exemption on such grounds. You must pay the Social Security/ Medicare tax until receiving notice from the IRS that the exemption has been approved.

You should be able to answer "yes" to all of the questions in the following checklist if the financial arrangements for your first pastorate have been handled properly. Contact MMBB if you need more information.

• Does the church fully reimburse you for ministry-related expenses?

• Does the church have an Accountable Plan for your ministry-related expenses?
  
  
• Will the church provide Benefits for Life coverage for you?
  
  
• Will the church provide medical and dental coverage?
  
  
• Is your compensation (cash salary, housing and utilities) comparable to other professionals with similar education and responsibilities?
  
  
• Will the church provide you with a merit increase for proficiency and experience in addition to a cost-of-living increase?
  
  
• Does the church pay for utilities if you live in a parsonage?
  
  
• Does the church provide a Social Security/Medicare tax offset equal to 50% or more of your tax liability?
  
  
• If the church provides a parsonage, is a realistic rental value reported for Benefits for Life purposes?
  
  
• Will the church provide an equity allowance if you will be living in a parsonage?
  
  
• Will the church provide a housing allowance for furnishings, tenant's insurance, etc., if a parsonage is provided?
  

• If a housing allowance is provided, is it adequate for housing expenses?
  

• Does the church have a pastoral relations committee?
  
  
• Have you and the church agreed on the number of days off and vacation time?
  
  
• Have all agreements regarding ministry-related expenses, compensation, benefits and other items been put in writing?
  
  

The following print resources are available free of charge from MMBB:

• Federal Reporting Requirements for Churches

• Employer Guide for Church Treasurers and Related Business Administrators

• Pastoral Budget Worksheet
  
  
• Benefits for Life, outlining the program to provide disability and life insurance protection today and retirement income tomorrow
  
  
• Social Security Information for Those Entering Ministry
  
  
• Tax Guide for Ministers
  
  

Pastoral Relations Committee, Judson Press, P.O. Box 851, Valley Forge, PA 19482-0851, 800.458.3766.

Social Security for Members of the Clergy and Religious Workers, IRS Publication 517. Contact your IRS office or call 800.829.3676.