A Guide To Payroll For Churches and Other Religious Organizations

If you want to run payroll as many times as you need without having to pay extra, we recommend any of the other providers included in our guide, all of which offer unlimited pay runs. Gusto is the best payroll service for small churches because it offers solid pay processing with tax compliance and HR tools at a reasonable price. It supports church payroll needs by allowing tax exemptions for the church and ministers. Church employees can also access their pay information through a self-service portal. It even integrates well with Aplos, a nonprofit fund accounting software that tracks payroll and tax payments for nonprofits and churches. All the church payroll software on our list offer full-service payroll, tax filing services, W-2 and 1099 tax forms at year-end, and unlimited pay runs (except MinistryWorks).

• Preference was given to software with built-in basic payroll reports and customization options.
• Pastors can opt out of Social Security (we wrote an article about that here).
• Online offer letter templates are available once you’ve selected a qualified candidate to hire.
• SECA, the Self-Employed Contributions Act, says a self-employed person must pay both the employer share and the employee share of Social Security and Medicare, which is 15.3%.
• Church employees who have non-clergy roles are required to pay payroll taxes, such as Social Security, Medicare, federal, state, and local taxes.

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But it should never be equal to wages, subject to Department of Labor rules under the Fair Labor Standards Act. First, your board or elders must approve each pastor’s housing allowance in writing. If you don’t do this, the IRS will see the https://www.bookstime.com/ housing allowance as taxable income. In this article, we’ll start by covering common problems with church payroll. But too many churches get each of these items wrong, overpaying taxes or putting the integrity of their church at risk.

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New clients transitioning to OnPay won’t have to worry about system setup and data migration because the provider will handle this for them. The service also includes setting up and customizing time tracking and accounting integrations you might need (the others on our list either charge extra for this or only offer it in higher tiers). Plus, its six levels of system permissions allow you to delegate payroll tasks, as well as select the solutions (such as online forms and PTO filings) that your clergy and non-clergy employees have access to. MinistryWorks is a payroll and tax solution for churches and ministries.

• Rippling also offers PEO services for employers that need to manage and administer smaller organizations.
• You can set up special clergy allocations and benefits, and you can also group employees who earn similar rates for faster processing.
• Also, you must upgrade to the higher tier to access the local payroll tax-filing services.
• Ever since, we’ve been expanding and deepening our expertise so we can provide the full array of payroll services your church, ministry or non-profit needs.
• Its payroll tax features automate applicable deductions for employees, but for workers you mark as members of the clergy, OnPay will exempt them from FICA taxes.
• Employersmust have a completed Form I-9 on file for each person on their payrollwho is required to complete the form.

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FICA means “Federal Insurance Contributions Act,” which is money set aside for Social Security and Medicare. As an employer, you’re on the hook for half of FICA (7.65% of each employee’s income). Then, you withhold the other half of FICA from your employee’s paycheck. You use IRS Form 941 to report the taxes you’ve withheld from your employees’ paychecks to the government. You file them at the end of each quarter, and you can read all about them here. Keep in mind that the figures above are cost estimates and may not include charges for other solutions or services, like paper check stocks.

The strongest points of OnPay are its HR functionality, reporting tools, payroll features, and cost. Some downsides include a lack of church payroll third-party accounting and management software for churches. Still, most users appreciate the platform’s responsive customer support.

Key Features

Time tracking

• Sometimes, we’ll notice a church pays an individual contractor something to the tune of $50,000 a year!
• It is a good option for religious organizations searching for an affordable and reliable payroll solution with experience working with churches.
• The most affordable plan may not include all the features your church needs.
• Finally, its top-tier Multiply plan has tools to manage multi-campus church membership and funding.
• Because of a pastor’s dual tax status, the employee won’t have to pay income tax on that amount, giving them an artificial pay raise.
• The Tax Reform Act of 1984 allows a religious body to elect a special exemption from the employer’s share of FICA taxes if it opposes such taxes on religious grounds.

MinistryWorks Reporting