10 Tax Forms You Need to Know About

Now that the new year is in full swing, tax forms should be moving to the forefront of your mind. Each year, churches and ministries are required to fill out certain tax forms in order to maintain IRS compliance. However, many churches, pastors, and church administrators are simply unaware of them all. 

To help you, I have compiled a list of the forms that your ministry should be mindful of in 2017.

For your convenience, I have divided the pertinent forms into three categories: 

  1. federal tax forms, 
  2. state filings, and 
  3. internal church documents. 

After reading this post, if you have questions pertaining to any of these forms, please give our office a call at 877-494-4655.

Federal tax forms

Forms W-9 and W-4:

Do you know that your ministry is required to collect information from the pastor and employees using Form W-4? Furthermore, do you know that your ministry is required to collect information from guest speakers using Form W-9? In essence, failure to collect these forms can result in stiff fines and penalties.

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For example, let us say that your church invites Pastor Dave to preach. After he preaches, the church takes up an offering of $1,000.00. However, the church does not collect from him Form W-9. According to the law, in this particular situation, the church is liable for a 28% tax on the love offering. Therefore, make sure that your church collects a completed Form W-9 from each guest speaker.

Make sure your church collects a completed Form W-9 from each guest speaker.

Forms W-2 and W-3:

Many churches employ ministers and other individuals without correctly documenting their salaries and housing allowances. The fact is that 100% of the pastor's salary must be reported on Form W-2. This is true for all other church employees, such as janitors, secretaries, officers, elders, deacons, worship leaders, and anyone else who works for the church.

Form W-3 is a transmittal form that is sent to the Social Security Administration (SSA) showing total earnings, Social Security wages and withholdings, and Medicare wages and withholdings for all employees during the previous tax year. This form is sent with “Copy A” of Form W-2 for all employees.

Too often I see a pastor’s Form W-2 that is completed incorrectly. When reporting a pastor's income on Form W-2, his/her salary minus the qualifying housing allowance should be inserted on line 1. Lines 3, 4, 5, and 6 must be left blank since the pastor is responsible for withholding and paying his/her own taxes. Lastly, the housing allowance is reported on line 14 of Form W-2.

If your church needs assistance with these forms, then check out our W-2 and 1099 Tax Kit by clicking here.

Forms 1099-MISC and 1096:

Far too often churches distribute 1099s to the wrong individuals. The pastor, worship leader, and others who work for the church on a regular basis must not receive a 1099-MISC from the church.

This form is for contractors who are not considered employees of the church. To determine whether or not an individual is an employee, you can use common-law rules as described in IRS Publication 15-A. (You can also learn more about common-law rules from a previous blog by clicking here.)

Form 1096 is similar to Form W-3 in that it is a one-page summary which indicates the totals of the Form 1099-MISC informational returns that you are submitting to the IRS.

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Forms 941 and 944:

If you have more than one employee then you are required to file a quarterly Form 941. This form needs to reflect the total wages subject to federal income tax withholding, Social Security and Medicare tax, as well as the amount of tax withheld and sent to the IRS.

If the minister is the only person receiving compensation and he/she does not have a voluntary withholding agreement in place, the church technically does not have to file a quarterly Form 941. However, it is recommended that your church still file Form 941.

In this instance, you would simply insert $0.00 on Form 941 since ministers are responsible to withhold their own taxes. Most likely, once the IRS has received (over the course of a year) multiple Form 941s with $0.00, it will send you a letter requesting that the church instead file an annual Form 944.

Take note that once your church begins paying a non-ministerial employee, you will be responsible to file a quarterly Form 941.

Form 990:

It is important to know that churches are exempt from filing Form 990. All other tax-exempt organizations must file Form 990. There are three different 990 forms which you should know:

Form 990 long: File this form if your gross income is $200,000.00 or more, or your assets are $500,000.00 or more.

Form 990-EZ: File this form if your gross income is more than $50,000.00, but less than $200,000.00, and your assets are $500,000.00 or less.

Form 990N (e-Postcard): File this form if your gross income is less than $50,000.00. This is an electronic postcard form that is very easy to complete. We can assist your ministry with any of these Form 990s; just call us at 877-494-4655.

It is important to know that churches are exempt from filing Form 990.

(Recommended reading: "Revoked for One Missed Form")

Form 990-T:

This is a form that churches and ministries often overlook. Any nonprofit organization that has earned gross unrelated business income of $1,000.00 or more must file Form 990-T. This is a tax form that is used to collect income tax from unrelated business income activities.

State filings

State annual report:

Over 39 states require that you file an annual report, while other states require a biennial or periodic reports. It is important that you file this report by its deadline. If you would like more information, we will be happy to look up your state and tell you how we can help.

(Recommended reading: “How to Simplify All of Your Church’s Filing Requirements”)

Property tax exemptions:

If your ministry purchased any real estate in 2016, now is the time to go to your county property tax assessor and request a property tax exemption form for your church. Most counties have a very specific deadline for this form. This is an exemption that is only available in certain states. Simply give us a call at 877-494-4655, and we can assist you with it.

Internal church documents

Donor giving receipts:

Do not forget to issue contribution statements to your donors. We recommend that these statements be issued by January 31st. To learn more about the specifics of donor giving receipts and your responsibility, click here.

Profit & loss reports:

January is the month for churches and ministries to prepare accurate profit and loss statements, as well as balance sheets, to analyze their financial positions. These reports are useful to the pastor and board members because they can rely on them to prepare the budget for the upcoming year. Correctly maintaining these reports helps to determine how your ministry can better serve the community and identify what new services it can provide, if any.

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Board meeting minutes:

By now, your organization has most likely held its first board meeting of the year. However, without board meeting minutes your board meeting is simply a time of fellowship. Board meeting minutes are arguably the most important administrative documents that your organization must maintain.

They serve as the documentation of the corporate acts of your organization. Without board meeting minutes, your organization cannot substantiate that your organization properly approved decisions such as the adding or removing of board members, adopting of bylaws, policies, salaries, etc.

(Recommended reading: "Do You Know How to Take Board Meeting Minutes?")

Do not get discouraged . . . get help!

I have spoken to hundreds of pastors who felt that they lacked "one key person" needed to make their church administration function properly. One reason why is because they did not have the knowledge to understand what is needed. Even more, they lacked the necessary knowledge to delegate their administrative responsibilities to a person with the skill set to get the job done. 

Our new KeepRIGHT Program might be exactly what you have been looking for to help with your ministry.

Give us a call today at 877-494-4655 to find out how the KeepRIGHT Program can help you to keep up with all the filing requirements for your church, or simply click on the link below. We are happy to assist in any possible way!

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