The benefits of a compensation plan
Your church can maximize its limited resources by implementing a sound compensation plan.
The dangers of a lump-sum approach
Paying a lump-sum amount to your minister to break down as he desires can be unwise.
- It often causes ministers to pay higher taxes, increasing financial burdens for their families.
- It can lead to a financial hardship for the church if a minister does not have the expertise to properly structure a plan.
- It distorts the amount of actual income the minister has available to provide for his family.
The eligibility requirements of a Minister for tax purposes
Generally, a Minister for Tax Purposes is ordained, licensed or commissioned and fulfills a majority of the following: administers the ordinances, conducts religious worship, has management responsibilities and is considered to be a religious leader by the church. These ministers have a dual tax status. They are “employees” for income tax purposes and “self-employed” for the purpose of Social Security.