Disclaimer: This is general tax advice so don’t sue me. Pretty much every year I hear about one of my pastors having problems with their taxes. Clergy taxes are confusing and complicated so it’s going to happen. What makes it 10x worse is when the pastor has way underpaid taxes and now has interest and penalties on top of a mess to clean up. Here’s what I recommend:
If you are a Brand New Clergy
- Find a clergy tax professional: I provide a list below. They are few and far between. They are well worth the cost.
- Use my Clergy Tax Estimator: I also link that below. This does not replace a clergy tax professional, but it could help you get a better idea if your tax professional is legit.
- Fill out a practice Form 1040: This isn’t really preferred, but, if you already have some tax experience, it’s better than nothing.
If you are an Experienced Clergy
- Start with Last Year: Look at your 2020 Total Tax (Line 24)…assuming your return was prepared by a clergy tax professional. Assuming your compensation and withholdings are similar to 2020, this is the number you can aim for.
- Make Adjustments for Big Things: Big things that can be adjusted for would include: Being moved, getting large unexpected taxable income (e.g. Pension Rebate), adding a child or having one age out of the tax credit. For Child Tax Credits, the amount is increasing from $2,000 to $3,000 for those 7-18 and $3,600 for 0-6.
- Visit with a clergy tax professional: They usually provide estimates for you and can help you for the more complicated changes.
- Clergy Tax Estimator: https://www.dakotasumc.org/media/files/CONFERENCE/5_Conf_Finance_Benefits/Finance/Clergy_Tax_Estimator.xlsx
- Clergy Tax Training: http://jctaccounting.com/2021/06/22/clergy-taxes-2021/
- Preparing Pastor’s W-2: http://jctaccounting.com/2020/01/03/how-do-i-prepare-my-pastors-w-2/
- IRS Form 1040: https://www.irs.gov/pub/irs-pdf/f1040.pdf
- Recommended Clergy Taxperts:
- Connie Buskohl: http://cbuskohl.com/
- Marilyn Perry: https://www.dakotasumc.org/about/find-a-person/marilyn-perry
- Donna Kuper: http://dellrapidschamber.com/kuper-complete-accounting/
- Jim Brown: https://www.klabobrown.com/our-team/
- Perry Kudrna: https://www.ktllp.com/our-team/