Does My Pastor Fill Out a W-4?

Ministers still pay taxes—but are exempt from automatic withholding

Beware of this scenario: A payroll processor at another church suggests that your minister claim 15 dependents on a Form W-4 because that’s how her church “has always done it.” Why do this? The reasoning seems straightforward: a claim of 15 dependents would ensure that a minister’s pay is not subject to federal income tax.

What’s the harm?

Submitting an accurate Form W-4 is important; an inaccurate claim can have serious consequences. The problem with a minister declaring more dependents than he or she actually has just to avoid federal tax withholding is threefold:

1. It’s an unnecessary risk. Because ministers are exempt from federal income tax withholding, they are not required to complete a Form W-4 at all. However, as a matter of policy, your ministry may want to have your minister complete a W-4, documenting the decision not to withhold wages. To forgo withholding, simply have the minister write “exempt” in Box 7 of the Form W-4. This practice will be a more accurate statement than claiming “15” dependents.
2. It’s a red flag. The IRS may consider this false reporting. If the IRS suspects under-reporting, it could trigger a review, a mandatory withholding rate, or a fine.
3. It’s simply untrue. A signature on a W-4 declares that,“… I have examined this certificate, and to the best of my knowledge and belief, it is true, correct, and complete.” It is never a good idea to submit intentionally inaccurate information to the Internal Revenue Service (IRS).

Opting in

While withholding federal income tax from paychecks is optional for ministers, it is important to note that ministers are required to pay these taxes like everyone else. A minister can “opt in” to withholding the required federal tax income amount by voluntarily completing a Form W-4. A set dollar amount or allowance is subtracted from each paycheck to cover annual taxes. The IRS Withholding Calculator can help determine your minister’s correct withholding amount. Remember, updating a Form W-4 requires a new form submission—changing or altering an existing form is not allowed. Contact a licensed attorney or tax professional to ensure that any changes you want to make comply with federal law. If you’d like to read the four other tips in this series, download Payroll and the Church: Answers to 5 Common Questions from MinistryWorks.

The information in this article is intended to be helpful, but it does not constitute legal advice and is not a substitute for the advice from a licensed attorney in your area. We strongly encourage you to regularly consult with a local attorney as part of your risk management program.