Are Ministers Employees?

For tax purposes, you may not want to be self-employed. Michael Weber, a United Methodist minister from Stonewall, North Carolina, deducted computer equipment and books as business expenses on his 1988 tax return--under Schedule C, for self-employed workers.

The IRS argued that Weber was a church employee, not a self-employed worker, and so those expenses could be listed only on Schedule A and only if they exceeded 2 percent of his adjusted gross income. A Federal Court judge ruled in favor of the IRS, thus turning Weber (and nearly all of the 20,000 United Methodist clergy supervised by a bishop) from self-employed professional into employee.

The ruling is a landmark case that may affect other denominations. LEADERSHIP asked J. David Epstein, an attorney specializing in tax law for clergy, to discuss the tax implications of filing as a church employee.

For years, many accountants have advised ministers that they should receive 1099s (for self-employed workers) instead of W-2s (for employees). ...

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