Common use of PASTORAL TAXATION Clause in Contracts

PASTORAL TAXATION. In the Church of the Brethren, pastors are not self-employed, but are rather common-law employees of the congregation who are exempt from FICA (Federal Insurance Contributions Act) but are subject to SECA (Self Employment Contributions Act). Employers of pastors are prohibited from withholding FICA (Social Security & Medicare) taxes for them, as they do for their non-pastor employees. Thus, pastors are required to pay self- employment taxes on all income earned as pastors to contribute to Social Security & Medicare. Employers of pastors may, however, withhold federal (and state and local, if required) income taxes for the pastor so that the pastor does not have to make estimated tax payments. This should occur upon request of the pastor and upon receipt from the pastor of IRS Form W-4. • Federal (and State and Local) Income Taxes • FICA (Federal Insurance Contributions Act) Taxes are taxes on Social Security and Medicare income, and are paid half by the employer and half by the employee through employer withholding. • SECA (Self-Employment Contributions Act) Taxes are essentially both halves of FICA taxes, paid by the self-employed person. They accomplish the same result: full payment of taxes due for Social Security and Medicare for the pastor. If you have any questions about completing a Form W-2, call the IRS at 0-000-000-0000. IRS FORM W-2 BOX NUMBERS PAGE 7 TABLE CELLS: CONGREGATIONC PASTORP Box 1: Wages, tips, other compensation ( 1C + 9C ) MINUS ( 2cP + 3aC + 3bP + 4aP [Codes D, E, F, G, H only] + 5aP + 6aP + 6bP + 6cP + 7aP + 7bP + 7cP ) Box 2: Federal income tax withheld **see note below** Box 3: Social security wages Leave blank or enter $0.00 Box 4: Social security tax withheld Leave blank or enter $0.00; **see note below** Box 5: Medicare wages and tips Leave blank or enter $0.00 Box 6: Medicare tax withheld Leave blank or enter $0.00; **see note below** Box 7: Social security tips Leave blank Box 8: Allocated tips Leave blank Box 9: Verification code Box 10: Dependent care benefits Box 11: Nonqualified plans Box 12: Codes 4aP (choose appropriate code for pension contribution type from attached list). Other codes may also be appropriate (e.g., “W” for an HSA or “FF” for a QSEHRA). Box 13: (Checkboxes) Statutory employee, Retirement plan, Third-party sick pay If 4aP or 4bC, check the box labeled “Retirement plan” Box 14: Other If 2aC (label “Parsonage FRV” or “PAR FRV”) If 2cP or 3bP (label “Housing Exclusion” or “HOU EXCL”) If 3aC (label “Parsonage Adjustment” or “PAR ADJ”)

PASTORAL TAXATION. In the Church of the Brethren, pastors are not self-employed, but are rather common-law employees of the congregation who are exempt from FICA (Federal Insurance Contributions Act) but are subject to SECA (Self Employment Contributions Act). Employers of pastors are prohibited from withholding FICA (Social Security & Medicare) taxes for them, as they do for their non-pastor employees. Thus, pastors are required to pay self- employment taxes on all income earned as pastors to contribute to Social Security & Medicare. Employers of pastors may, however, withhold federal (and state and local, if required) income taxes for the pastor so that the pastor does not have to make estimated tax payments. This should occur upon request of the pastor and upon receipt from the pastor of IRS Form W-4. • Federal (and State and Local) Income Taxes • FICA (Federal Insurance Contributions Act) Taxes are taxes on Social Security and Medicare income, and are paid half by the employer and half by the employee through employer withholding. • SECA (Self-Employment Contributions Act) Taxes are essentially both halves of FICA taxes, paid by the self-employed person. They accomplish the same result: full payment of taxes due for Social Security and Medicare for the pastor. If you have any questions about completing a Form W-2, call the IRS at 0-000-000-0000. IRS FORM W-2 BOX NUMBERS PAGE 7 TABLE CELLS: CONGREGATIONC PASTORP Box 1: Wages, tips, other compensation ( 1C + 9C ) MINUS ( 2cP + 3aC + 3bP + 4aP [Codes D, E, F, G, H only] + 5aP + 6aP + 6bP + 6cP + 7aP + 7bP + 7cP ) Box 2: Federal income tax withheld **see note below** Box 3: Social security wages Leave blank or enter $0.00 Box 4: Social security tax withheld Leave blank or enter $0.00; **see note below** Box 5: Medicare wages and tips Leave blank or enter $0.00 Box 6: Medicare tax withheld Leave blank or enter $0.00; **see note below** Box 7: Social security tips Leave blank Box 8: Allocated tips Leave blank Box 9: Verification code Box 10: Dependent care benefits Box 11: Nonqualified plans Box 12: Codes 4aP (choose appropriate code for pension contribution type from attached list). Other codes may also be appropriate (e.g., “W” for an HSA or “FF” for a QSEHRA). Box 13: (Checkboxes) Statutory employee, Retirement plan, Third-party sick pay If 4aP or 4bC, check the box labeled “Retirement plan” Box 14: Other If 2aC (label “Parsonage FRV” or “PAR FRV”) If 2cP or 3bP (label “Housing Exclusion” or “HOU EXCL”) If 3aC (label “Parsonage Adjustment” or “PAR ADJ”)