The compensation of a minister earned in the exercise of the ministry is specifically excluded by the Internal Revenue Code from mandatory federal income tax withholding. In addition, minister's compensation is subject to self-employment tax which is also excluded from mandatory withholding. Therefore, you should either pay quarterly installments of estimated tax or mutually agree on voluntary withholding with your employer.
Quarterly estimated payments
Your quarterly tax payments (federal and self-employment) are due as shown below:
For the period Due date*
Jan 1 - Mar 31 Apr 15
Apr 1 - Jun 30 Jun 15
Jul 1 - Sep 30 Sep 15
Oct 1 - Dec 31 Jan 15
*due dates falling on a Saturday, Sunday, or legal holiday may be extended to the next business day
An Estimated Taxes Worksheet is provided for you through this link. Or contact Landmark Tax Service and we will help you estimate your tax liability. You should remit your payments on current Forms 1040-ES payment vouchers which can be obtained directly from the IRS or through Landmark Tax Service. Alternatively, you can pay your tax online at www.eftps.gov. The IRS does not send out notices of taxes due. If changes in income or deductions revise your original estimate, that estimate may be adjusted on your next installment of estimated tax.
You will eventually report your self-employment tax liability based on your actual earnings and applicable deductions to IRS. This is done on Schedule SE, "Self-Employment Tax”, and filed with your individual income tax return (IRS Form 1040). The IRS will apply all of your estimated tax payments (including any tax withheld by your employer, if applicable) towards your total tax liability (federal and self-employment). If your Form 1040 reports a "substantial" understatement of taxes paid, the Service will penalize you. However, this penalty is not imposed if your total tax liability, reduced by your estimated payments and any income tax withheld, is less than $1,000. For more information, see IRS Publication 505, Tax Withholding and Estimated Tax.