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How the Obama tax bill will affect church employees

December 21, 2010

On December 17, 2010, President Obama signed into law H.R. 4853, the Tax Relief Unemployment Insurance Reauthorization and Job Creation Act Of 2010, which will affect every U.S. employer and several areas of payroll, tax and benefits administration in January.

Back in 2008, after the passage of the 2008 stimulus package, many taxpayers received $300 in the form of a stimulus check. In years since, that stimulus check has been morphed into the Making Work Pay credit (resulting in $400 per person).

Right now, employees pay a payroll tax, also called FICA tax, of 7.65% on their first $106,800 of income. 6.2% goes towards Social Security (OASDI) and 1.45% goes towards Medicare. After their first $106,800, you only pay the 1.45% of Medicare (there is no limit) and not the 6.2% towards Social Security. For 2011, the percentage you need to pay towards Social Security, as an employee, will be reduced by 2%. For someone earning the maximum $106,800, it’s a reduction of $2,136. After you take out taxes, based on your tax bracket, the rest goes into your pocket.

Clergy are self-employed for social security and will pay less self-employment tax this coming year. The Social Security portion of self-employment taxes has been reduced for 2011, from 12.4 percent to 10.4 percent. If you pay estimated taxes, this amount may reduce your 2011 tax liability.

The first stimulus check gave you $300, the next one gave you up to $400, and this one has the potential of putting over two thousand dollars into your pocket over the course of the year.

Those churches utilizing Clergy Financial Resources’ payroll service are well positioned to seamlessly remain in compliance with these and many other provisions.

Clergy Financial Resources

Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations.

To learn more about our services, please visit the links below:

Tax Preparation

Mortgage Financing

Church Payroll

Clergy/Church Tax Law Products


From → Clergy Tax Law

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