MINISTER AND MISSIONARY TAXES
MINISTER AS A DUAL-STATUS TAXPAYER
Most ministers are treated as dual-status taxpayers. They are employees for income tax purposes but are considered self-employed for Social Security and Medicare tax purposes.
The employer reports a minister’s income as wages in box 1 on Form W-2. Social Security and Medicare taxes are not withheld and the W-2 Form will show no amounts in boxes 3-6. The minister pays SE tax on the wages.
Ministers are not subject to federal income tax withholding. A minister and employer may agree to voluntary withholding to cover any income and SE tax. All withheld tax is reported in box 2 of Form W-2 as federal income tax withheld. A minister may also elect to have nothing withheld and pay all taxes, income tax and SE taxes quarterly using a Form 1040ES.