Clergy Stipends and Allowances        0037-02     ZZall

                                                                            - - - Rejoice in the Lord always ... again I say Rejoice !!! - - -     

Various Links on this Web Site:  ABOUT  US   |  OUR PURPOSE   |  TABLE OF CONTENTS   |  SEARCH  MATTERS  |  HELP DETAILS   |  FUND ACCTG VIA COMPUTERS   |  GLOSSARY


                            TO:  Interested Ministries                                                                                         FROM: Jim Bramer, Retired Auditor CPA
                                                                                                                                         Psalm   89:1     FILE: 0037-02/all

                            RE:  Clergy Stipends & Allowances                                                                       ORIGINATED:  June 1997    


     Below is a list of hypothetical Online Email threads (THRD) between any one of the following MFTeam members: PAT (Ministry Chief Executive), LEE: (Ministry Volunteer Treasurer), or FRAN: (Ministry Computer Bookkeeper) and   Jim@bcidot.org     Click here and go to List of threads (THRDs) at www.bcidot.org


FR: PAT

        Jim, the subject I would like to discuss is "
Accounting for Clergy Stipends and Allowances;" particularly within a Church setting.  Lee, Fran and I realize that there are a 'garden variety' of issues related to this topic. We have already accessed and benefited from  Here  (Clergy Finance and Tax Issues) and  Here   (Fund Accounting Issues). These have helped us a great deal and we want to  'grow'  from these resources.


FR: Jim@bcidot.org

        Let me share, Pat, that Pastors have historically received financial "STIPENDS plus ALLOWANCES" for a number of purposes. As I reflect back on this over the past three decades, or so, I believe that Church leaders have viewed Allowances as "a way to honor our Pastor." Our government, interestingly, have for years recognized a uniqueness by the Self Employment status and the tax-free Housing 'Allowance.'

  •    I often use the term 'stipend' rather than 'salary', because 'stipend' is intended to cover more taxable topics that 'salary'. My position is that, absolutely, these special Men of God should be honored financially for their service to the Lord and to each of us.   But, like all of us, they are taxpayers and their financial affairs are to be tax compliant and as simple as possible for all parties involved. In my opinion, this can be done by such actions as:

  •    Be sure that the Clergy ends up with 'take home' pay that totals as much, or more, as the present 'Stipends plus Allowances' method.

  •    Eliminate the need for both the Church and the Clergy to excessively report expense reimbursements. Many of the present methods require a special tax reporting method for both the Church and the Clergy. Since it is basically the same dollars involved, then use the most efficient IRS permissible reporting methods  Plse Go Here  for Mileage Reimbursements issues.

  •    Church Clergy are pseudo, or common-law, employees who work for an entity, like many of us. They are self-employed for certain tax purposes only. Accordingly, they receive their pay 'after earning it' and are NOT paid at the beginning of the month that follows. Most of us get paid at the end of  the month for which we have just worked, etc.

FR: PAT

Appreciate your perspective, Jim.

FR: JIM

       Pat, let me share the following as to Allowances:

PLEASE DO NOT:

  •      Provide flat sum 'Allowances' for such purposes as Self Employment Tax, Automobile Expenses and a variety of Professional Expenses, etc.

  •       Include any 'Allowances' within their annual form W-2;

  •      Obligate the Clergy to include any "Allowances' within their annual taxable income and also be required to deduct related Business (Ministry) expenses via their personal tax return.  Please Go Here  for best way to handle Vehicle Expenses.

  •      Unnecessarily report tax-free benefits like Medical Insurance and Retirement financial information to taxing authorities.

  •     Forget that annual Clergy 'love offerings' are in fact taxable 'bonuses' and need to be included with other Stipends within their annual form W-2.

  •      Include their pay within the Staffer quarterly form 941 as subject to Social Security and Medicare taxes.

PLEASE DO:

  •      Add the equivalent of "Self Employment Tax - for Social Security and Medicare" sums to the Clergy's normal "pay" stipends. Example, normal annual stipend is $40,000 and their annual Self Employment Tax is something like $ 5,000 ... their taxable stipend then is $45,000 with no reference made to the 'Self Employment Tax' addition.

  •      Provide Clergy with something like an Imprest Petty Cash (or Expense Advance) Fund subject to monthly settlement (please Go Here for details).

  •      Have the Clergy keep a record of Business (Ministry) miles of their personal vehicle and monthly be reimbursed via a Ministry check or from their "Expense Advance Fund" at the current IRS rate per mile. Thereby requiring no 'Auto Allowance' and accounting of it for tax purposes. Please Click Here  for info re the best way to handle such matters.

  •     Follow the tax regulations to insure that the 'Clergy Housing or Manse Allowance' is handled properly so that it is subject only to 'Self Employment Tax'   and NOT to Income Tax. This includes having the amount of the allowance at the beginning of the calendar year. 

  •      See that all Ministry expenses are paid from the above "Expense Advance Fund" and regularly accounted for and reimbursed. Clergy need many 'Books'; be sure that the 'Books' covered by the Church budget belong to the Ministry and NOT to the Clergy. Any personal 'Books' Allowance is added to the taxable Stipend .... like the 'Self Employment Tax' matter above.

  •      Have the Clergy use the Church's Plastic  (Click Here) re such Plastic or Credit Cards buying for necessary Church expenses. CAUTION:  The clergy should NOT use the Church's Plastic for personal expenses ....... especially for personal vehicle expenses that are to be reimbursed on a mileage basis - see above.

           Contact Jim@bcidot.org for current publication resources via fellow CPA Dan Busby on these topics


    The bulk of this publication originated in June 1997 and was .  UPTD: May 24, 2010  

ABOUT  US   |  OUR PURPOSE   |  TABLE OF CONTENTS   |  SEARCH  MATTERS   |  HELP DETAILS   |  FUND ACCTG VIA COMPUTERS   |  GLOSSARY