NBUSA Compensation & Tax Memos are designed to help pastors and church treasurers with various clergy and church financial matters, such as retirement, Social Security, taxes, business expenses, ministerial compensation, church audits, and more. Each memo is reviewed annually for accuracy by certified public accountants to assure you’re getting the most accurate information.
Below is a list of our memos, along with brief descriptions.
| Memo #1 - Housing for Your Pastor: Parsonage or Housing Allowance?
Should a congregation provide a parsonage for the pastor or should they provide a housing allowance and allow the minister to purchase their own home? This memo offers ideas to consider when trying to make this decision.
| Memo #2 - Church Employees or Independent Contractors?
Who is a church employee and who isn't? Determining the answer to this question isn't all that complicated, yet many churches have gotten into trouble because they failed to make the distinction between these two categories. This memo will help you to avoid problems with the IRS on such matters.
| Memo #3 - Tax and Reporting Procedures
Tax and reporting procedures with which churches must comply can be complicated. Is the pastor an employee or self-employed? This memo discusses income tax withholding, Social Security, and forms that should be filed to help churches properly comply with IRS guidelines.
| Memo #4 - Strategies for Structuring Ministerial Compensation
The proper structuring of ministerial compensation can increase the amount of spendable cash for pastors. This memo discusses IRS regulations for business expense reimbursements, and also explores the "cost of a ministry" versus the "cost of a minister."
| Memo #5 - Minimizing Income Taxes for Church Employees
One of the many responsibilities church boards face is that of minimizing income taxes for their employees by appropriately structuring their compensation package. IRS tax rulings not only make this possible but also make it very important. This memo discusses tax-free employee benefits, how to handle business expenses—including the creation of accountable reimbursement plans, and other steps churches can take to minimize taxes for employees.
| Memo #6 - Housing Allowance in Retirement
Under current IRS provisions, retired ministers who are ordained or district-licensed in the Church of the Nazarene may receive up to 100% of Nazarene Benefits USA-administered retirement plan payments as minister's housing allowance. This memo explains how to properly comply with the requirements for this tax advantage.
| Memo #7 - How Much Do We Pay the Minister
Scripture specifically speaks about the importance of caring for and financially supporting pastors. This memo for church boards helps explain the importance of properly compensating the pastor and provides a sample guide for setting up a compensation package. Use this Compensation Calculator to approximate a minister's salary package. The calculator can be used in the church's annual budget process and to satisfy the denomination's salary review requirement.
| Memo #8 - The Annual Church Audit
Church board members have a long list of duties. Among these is the responsibility for tracking the money that flows through the church. This memo speaks to the importance of the annual church audit and provides information on what should be included.
| Memo #9 - Workers' Compensation Laws and the Local Church
Unless specifically exempted by law, church employers are subject to workers' compensation laws. Churches should be aware of their liability in the event that an employee is injured while on the job. This memo offers guidelines about how to comply.
| Memo #10 - Can Ministers Opt Out of Social Security?
The U.S. Tax Code provides a means for some ministers in some denominations to exercise an option to terminate Social Security/Medicare coverage, but it must be done because of conscientious objection to or religious principles against receiving public insurance. The practice and polity of the Church of the Nazarene provide no basis for an exemption for Nazarene clergy from Social Security/Medicare self-employment taxes. Learn more in this memo.
| Memo #11 - Auto and Other Business Expense Reimbursements
Churches can be better stewards and help their pastors save tax dollars by establishing accountable expense reimbursement plans. This memo explains how to do this properly.
| Memo #12 - Who is a Minister for Tax Purposes?
Who is a "minister" for tax purposes? The answer is significant because it affects how an individual reports compensation and pays taxes. This memo includes the IRS definition of a minister, and how the various classifications of ministers within the Church of the Nazarene are affected for tax purposes.
| Memo #13 - The Minister's Housing Allowance
Ministers have a unique and valuable IRS benefit called "The Minister's Housing Allowance," but determining how to take advantage of this benefit can be confusing. This memo helps to explain how to properly claim this benefit and how to report it at tax time.