By federal law, clergy wages earned from ministerial services are exempt from income tax withholding, so churches may not withhold federal income taxes from a pastor’s pay. That is why pastors are responsible for paying their own taxes through quarterly estimated tax payments. Of course, this requires proactive budgeting and disciplined planning from the pastor, who may not be equipped or willing to handle these tasks.
Pastors looking for a more hands-off alternative can voluntarily arrange to have their church withhold their income taxes through what’s called a “voluntary withholding agreement.” Under this agreement, the church withholds the pastor’s federal income tax. The pastor can initiate this agreement by submitting a completed IRS Form W-4 (Employee’s Withholding Certificate). Keep in mind, this agreement only allows for withholding of federal income tax -- not SECA payroll tax (combination of Social Security tax and Medicare tax).
A voluntary withholding agreement provides many benefits but also comes with some nuances and potential pitfalls. Please consult with a tax advisor if you’re considering this arrangement.
*The information in this post is for informational purposes only. The information does not constitute any financial, insurance, investment, legal, or tax advice. MMBB is not liable for any success or failure that is directly or indirectly related to the use of this information.
Back to Financial Resource CenterTranslations of any materials into languages other than English are intended solely as a convenience to the non-English-reading public. We have attempted to provide an accurate translation of the original material in English, but due to the nuances in translating to a foreign language, slight differences may exist.
Las traducciones de cualquier material a idiomas que no sean el inglés son para la conveniencia de aquellos que no leen inglés. Hemos intentado proporcionar una traducción precisa del material original en inglés, pero debido a las diferencias de la traducción a un idioma extranjero, pueden existir ligeras diferencias.
You will be linking to another website not owned or operated by MMBB. MMBB is not responsible for the availability or content of this website and does not represent either the linked website or you, should you enter into a transaction. The inclusion of any hyperlink does not imply any endorsement, investigation, verification or monitoring by MMBB of any information in any hyperlinked site. We encourage you to review their privacy and security policies which may differ from MMBB.
If you “Proceed”, the link will open in a new window.
Back to Top
