Five Tips for Clergy Paying Estimated Taxes
Estimated tax is a method used to pay tax on income that is not subject to withholding. Most clergy are exempt from tax withholdings and FICA. You must pay estimated taxes during the year based on your ministry income.
These five tips from Clergy Financial Resources will provide you with a quick look at estimated taxes and how to pay them.
- If you have income from sources such as ministry income, honoraria, business income, interest, dividends, alimony, rent, gains from the sales of assets, prizes or awards, then you may have to pay estimated tax.
- As a general rule, you must pay estimated taxes in 2011 if both of these statements apply: 1) You expect to owe at least $1,000 in tax after subtracting your tax withholding (if you have any) and credits, and 2) You expect your withholding and credits to be less than the smaller of 90% of your 2011 taxes or 100% of the tax on your 2010 return.
- To figure your estimated tax, include your expected gross income, taxable income, taxes, deductions and credits for the year. You want to be as accurate as possible to avoid penalties. Also, consider changes in your situation and recent tax law changes.
- The year is divided into four payment periods, or due dates, for estimated tax purposes. Those dates generally are April 15, June 15, Sept. 15 and Jan. 15.
- Form 1040ES, Estimated Tax for Individuals, provides all you’ll need to pay estimated taxes. This includes instructions, worksheets, schedules and payment vouchers. The easiest way to pay estimated taxes, however, is electronically through the Electronic Federal Tax Payment System or EFTPS. You can also pay estimated taxes by check or money order using the Estimated Tax Payment Voucher or by credit or debit card.