Classification of Ministers, Employees, and Contractors
The first step in complying with the Internal Revenue Code is understanding how the code classifies ministers, employees, and contractors. The proper classification is essential because of the different tax laws that affect each category. Church Employees Software. Most churches will have at least some personnel in each of three separate categories:
1. Minister employees
2. Non-minister employees
3. Independent contractors
The book answers each of these questions:
- Do ministers receive special tax treatment?
- Who is considered a minister for tax purposes?
- Is a part-time youth/music minister considered a minister for tax purposes?
- Do non-minister church employees receive special tax treatment?
- Can the church choose to treat an employee as an independent contractor?
- What determines if someone is an employee or an independent contractor?
Church Employee Expense Reimbursements
Employee expense reimbursements are among the most misunderstood and misapplied issues for churches. As a result, most churches currently are out of compliance with the tax code without even knowing it.
The book answers each of the following questions:
- Can the church reimburse employees (including ministers) for their church-related expenses?
- Should employees be given an auto allowance?
Most pastors think that since they get a housing allowance, they should be entitled to an auto allowance. The advice in this chapter of the book will not only help your church comply with the law but will more than likely save your minister’s and employee’s tax dollars.
Churches can offer their employees a wide variety of tax-preferred benefits if they know how to approach them. Health insurance coverage and retirement plan contributions are two benefits that can save church employees significant tax dollars with minimal burden to the church.
Did you know that most employee benefits must be offered to all employees if offered to one employee? That catches many churches by surprise.
The chapter in the book discusses the types of benefits you can offer and the related compliance issues. It identifies the benefits that you can provide on a discriminatory basis and those that must be offered to all employees.