Employee/self-employed considerations 1.  Determination is made by the IRS

standards not the church. •  The arrangement/relationship of the minister to the

church is set by the church, but whether one is or is not an employee is determined by the IRS.

•  IRS form SS – 8 can be used to determine employment status.

a)   Dual status

Dual-status tax treatment means that the minister is an employee for income reporting, fringe benefit and expense deducting purposes (IRS), and self-employed for social security purposes (Social Security Administration.

IRS publications have historically presented the dual-status treatment for ministers performing services for a church or an integral agency of a church. To ignore the historic IRS position and report a minister’s salary and deduct their professional expenses on Schedule C (Profit or Loss from Business) will often

cause an audit and an assessment of additional tax liability by moving expenses from Schedule C (Profit or Loss from Business) to Schedule A (Itemized Deductions). Thousands of employed ministers have been audited and have experienced additional tax liability because they used Schedule C.

Employee/self-employed considerations 1.  Determination is made by the IRS

standards not the church. a)   Dual status b)  Employment determination

Independent  Contractor  or  Employee  If  not  sure  your  church  can  submit  IRS  Form  SS-­‐8  (Determina>on  of  Worker  Status  for  Purposes  of  Federal  Employment  Taxes  and  Income  Tax  Withholding)  

Publica>on  15-­‐A,  Employer’s  Supplemental  Tax  Guide,  provides  addi>onal  informa>on  on  independent  contractor  status.  

Three major categories used for employment determination:

1. Behavioral  Control.  2. Financial  Control.  3. Rela>onship  of  the  Par>es.  

Three major categories used for employment determination:

1.  Behavioral Control.

A.  Instruction. i.  How and when, or where you work.

ii.  What tools or equipment to use.

iii.  What assistants to hire to help with the work.

iv.  Where to purchase supplies and services.

Three major categories used for employment determination:

1.  Behavioral Control.

B.  Training. i.  If the business provides you with

training about required procedures and methods, this indicates that the business wants the work done in a certain way.

ii.  This suggests that you may be an employee.

Three major categories used for employment determination:

2.  Financial Control.

A.  Significant Investment. i.  If you have a significant investment

in your work, then you may be an independent contractor.

ii.  But one does not have to have a significant investment to be an independent contractor.

Three major categories used for employment determination:

2.  Financial Control.

B.  Expenses i.  If you are not reimbursed for some

or all of your business expenses, you may be an independent contractor.

ii.  A consideration is also that the expenses are high.

Three major categories used for employment determination:

2.  Financial Control.

C.  Opportunity for profit or loss. i.  If you can realize a profit or incur a

loss suggests that you are in business for yourself.

ii.  Most ministers do not have this opportunity.

Three major categories used for employment determination:

3.  Relationship of the Parties.

A.  Benefits i.  If you receive benefits like insurance,

pension or paid leave (vacation) you are probably an employee.

ii.  If you do not receive benefits you could still be an employee.

Three major categories used for employment determination:

3.  Relationship of the Parties.

B.  Written contracts i.  A written contract may show what

both you and the business intend.

ii.  This is very important especially if the relationship is hard to determine.

Employee/self-employed considerations 1.  Determination is made by the IRS

standards not the church. a)   Dual status b)  Employment determination

2.  Just because a church is tax exempt does not mean that the church does not have to follow tax laws regarding employment.